Weilers LLP

Errors of the Parents

Errors of the Parents

September 29, 2020

By Brian Babcock

According to a recent Superior Court decision in estate litigation “the errors of the parents are oft visited on their descendants.”

Disagreements created by bad estate planning decisions often lead to costly law suits which do nothing to promote family harmony. There is a reason why Charles Dickens’ classic novel Bleak House features an estate dispute which results in the entire estate being consumed in legal fees, with nothing left for the family members.

Although reforms to the court system make that result uncommon these days, we see too many reminders that no matter what the parties’ differences might be, good estate planning saves money and strife in the long run.

Of course, even the best estate planning lawyer cannot make parties who share ownership of a property agree about what should happen after they die, or make the issues that arise after death in the face of bad decisions simply disappear.

So we bring you the case of Cormpilas v. Ioannidis as a lesson and a warning.

B & G were husband and wife. They separated, but continued to share a home, holding title (ownership) as tenants in common. That form of legal ownership means that when one owner dies, the other owner does not inherit the deceased owner’s share. That share forms part of the estate of the deceased owner. B died in 2012. Her will left her half of the home to her grandchildren.

B & G’s son and his family moved into the home after B’s death and took care of G until G died in 2017. G’s will left his half interest to that son, the uncle of the grandchildren who inherited B’s share. The son lived in the home rent free until early 2020.

The grandchildren did not want to force G to leave his home. However, once he died, they wanted their uncle to either buy out their interest or move out. He refused to pay rent or move out, and treated it as his own home even after the law suit began.

After the grandchildren sued, an agreement was finally reached that the uncle would move out and sell his share to the grandchildren, to be based upon an appraisal. He then failed to do as promised. After two more court appearances, he finally complied. He was ordered to pay $5000.00 towards a portion of the grandchildren’s court costs, though no doubt the actual legal expenses were much more.

That left issues of “occupation rent” (or, alternatively, unjust enrichment) and damages.

After a hearing, the uncle was ordered to pay occupation rent of $22,500.00 and damages of $900 for damage to hardwood floors, plus $5,873.74 for items he removed from the house. Other damages claimed by the grandchildren were deemed factored into the valuation that established the sale price.

Occupation rent is an amount paid by one owner in possession of property to another owner. Historically, there was no obligation in law to pay occupation rent. However, one owner cannot exclude another.

The courts of equity – the same courts lampooned by Dickens in Bleak House – had responded with a remedy.

In more recent times, laws such as the Courts of Justice Act and the Family Law Act have codified certain situations in which occupation rent is paid, but not all. Although claims for occupation rent are frequently seen in the family law context, the broader equitable remedy remains available where there is a breach of a co-owner’s rights. It may be characterized as a breach of an implied lease, a trespass, or unjust enrichment.

In Ontario, the courts examine a long list of factors in determining whether to award occupation rent, including:

  • The timing of the claim for occupation rent.
  • The duration of the occupancy.
  • The inability of the non-resident owner to realize on their equity in the property.
  • Any reasonable credits to be set off against occupation rent.
  • Any other competing claims in the litigation.
  • The conduct of the non-occupying owner.
  • The conduct of the occupying owner.
  • Delay in making the claim.
  • The extent to which the non-occupying owner has been prevented from having access to his or her equity in the home.
  • Whether the non-occupying owner moved for sale, and if not, why not.
  • Whether the occupying owner has paid the mortgage or other carrying costs of the home.
  • Whether the occupying owner has increased the selling value of the property.

Obviously, not all factors apply to every case.

In this case, the principle on which the grandchildren might recover occupation rent was unjust enrichment, which requires that:

  • there be an enrichment of one party (in this case, the son/uncle);
  • a “corresponding deprivation” (of the grandchildren); and
  • a lack of “juridical reason”, such as a contract, or equitable concepts in favour of the son/uncle.

There was a clear enrichment of the uncle who had exclusive use of a home of which he was only half owner. Although he paid some carrying costs, he received a far greater benefit living rent free than he paid in expenses.

The claim of deprivation was more complex. The house increased in value during the period of exclusive possession. But the grandchildren were unable to use the property, or sell it, which was their desire.

There is no juridical reason for one co-owner to unilaterally enjoy exclusive occupation of a property worth well over one million dollars, to the exclusion of his co-owners.

On balance, the judge found that the son/uncle was unjustly enriched at the grandchildren’s expense. Occupation rent was ordered from the start date of the court proceeding until the son left the home.

In the end, the parties spent a great deal of money on lawyers, and delayed the sale of the property, to achieve a result which could have been avoided through better estate planning, or some common sense.

Although the result in Cormpilas v. Ioannidis might not be as bleak as in the Dickens tale, it is a cautionary tale that shows both the power of equity to resolve a dispute, and the desirability of preventing them in the first place.