Family Cottage Succession: A Dream or a Nightmare?

June 29, 2021

By Brian Babcock

The idea of a family cottage property being passed down through the generations appeals to many. However, without careful planning, it can turn out to be a nightmare rather than a dream.

Holt v. Grieg is an example which also illustrates the versatility of a certificate of pending litigation – not just for specific performance, but also for trust claims.

In Holt, the dispute was between brother and sister. The brother held the power of attorney for their elderly aunt, who had owned the property. The property conveniently offered two cottages, one of which was typically used by each of the brother and the sister. The aunt was mentally incapable of managing her own property.

Prior to the aunt’s incapacity, as part of her estate planning, the property was transferred into the brother’s name. He held it in trust for the aunt while alive, and was the sole heir to her estate upon death.

He said that it was the aunt’s wish that the property be used by extended family “for years and generations to come.” He agreed that the aunt wished his sister to share in the ownership of the property.

The property fell into disrepair, and the aunt did not have money to repair it. The brother then transferred the property into the names of himself and his sister. They then each contributed time and money to the repairs, though the exact amounts are in dispute.

The sister says she would never have done this but for the promise of an ownership interest.

The transfer from the brother to the brother and sister was a breach of the trust agreement with their aunt, so title was returned to the brother’s name alone, as trustee for the aunt.

Both families continued to share the property, and shared expenses such as utilities, insurance and property taxes.

In 2020, the brother sought to prevent his sister from using the property, complaining about “misuse” and saying that she was creating problems with neighbours.

The sister sued for a declaration of constructive or resulting trust to recognize her ownership interest. She sought a certificate of pending litigation to prevent her brother from selling the property until her rights were determined in court.

A certificate of pending litigation (or CPL) is a document issued under a court order and registered on title. It warns the world that the title is in dispute, and effectively prevents the owner from dealing with the property.

To obtain a CPL, the party seeking it must be suing for an “interest in land”. This almost always means that they are prospective buyer seeking specific performance of a botched real estate transaction.

So the sister’s claim that there is a trust is a bit different.

The brother agreed that a claim for a trust could be a claim for an “interest in land”, but suggested that his sister’s claim could be remedied by damages (money) and that the property was not unique.

Not surprisingly, the judge agreed with the sister’s position at this stage. Without deciding the merit of her claim, the judge did recognize that it is the use of a multi-generational family cottage property to which the claimant had contributed, not the money value, that was important in this case.

Granting the CPL maintains the existing situation and preserves the property until the dispute is resolved.

The judge also issued an interim injunction, ordering the terms upon which the parties would continue to share the property until the dispute is revolved.

The certificate of pending litigation is not just for specific performance actions. It may apply to trust claims also.

But the most important takeaways from this case are about planning, to avoid disputes:

  • careful succession planning for the future ownership of the property, if the intent is to keep it in the family
  • a plan for future sharing of expenses
  • a plan for how the use will be shared
  • a written agreement covering the shared cost and use, to reduce or avoid disputes in the future.

Estate or succession planning is all about the future. Sound planning requires thinking about what that future should look like.

Don’t let your dream turn into their nightmare.