Bare Trustee on the Hook for Mortgage with Sister-in-Law

In Weise v. Weise, an Ontario court ruled on a tricky property scenario involving a woman, her husband, her sister-in-law and several unpaid mortgage payments.

The woman, Andrea, was married to Tyson; he had a sister named Heidi. Andrea and Tyson wanted to buy a particular property together, but they did not qualify for a mortgage. They asked for Heidi’s help, essentially as guarantor and without any entitlement to beneficial ownership in the property.

Despite those intentions, they ended up drafting an agreement that made Heidi a Bare Trustee. The lender also insisted that Heidi become a joint mortgagor and be added on title as joint tenant. The intention still remained that only Andrea would remain responsible for all mortgage payments and for other expenses. On this basis, Heidi and Andrea went ahead and bought the property, but with only Andrea and Tyson using it as their matrimonial home. Heidi never lived there.

When Andrea and Tyson later separated, Andrea fell behind on the mortgage payments. This is when Heidi realized that the mortgagee bank had started taking the payments from her account instead. Andrea repaid only some of this money, so Heidi went to court for an order reimbursing her, and – with her status as joint tenant – enforcing her right to an outright partition and sale of the property under the Partition Act.

The court heard that in the past year since Andrea and Tyson split, Heidi had repeatedly asked Andrea to take her off the mortgage and title and to sell the property. But, Andrea’s hands were tied since it was a matrimonial home with special status in law. Since she and Tyson still had no separation agreement, there could be no sale without his spousal consent.

The court then turned to the law. First of all, it confirmed that a valid trust had been created here. Legally, all that was required was: (1) an intention to create a trust; (2) identification of the specific subject matter of the trust; (3) an identified beneficiary of the trust; and (4) a transfer of the trust property to the trustee. All those elements were present.

Next, the court considered Heidi’s partition-and-sale request under the Partition Act. Although that legislation states that a joint tenant may be compelled to make or suffer partition or sale at the court’s discretion, this was not an appropriate case to do so. Merely because Heidi had been named a joint mortgagor and joint tenant, this did not give her all the rights, powers, and obligations of a joint owner, or any interest in the property.

Practically speaking, Heidi had simply agreed to be a Bare Trustee under a trust agreement, to help her brother and sister-in-law. Naming her a joint tenant was simply to help establish that status. She held legal title to the property for Andrea, who was to remain the beneficial owner at all times. As Bare Trustee Heidi had: (1) no right to possession or to the proceeds of sale; (2) no independent power, discretion or responsibility in connection with the property; (3) no right to deal with it; and (4) no right to seek partition and sale. Similar to an agent, her only job was to carry out the instructions of Andrea, who was the trust beneficiary.

The court accordingly ruled that Heidi would have to remain on title. In due course she might claim indemnity from Andrea for the mortgage payments taken from her account, but this would have to wait until Andrea settled her issues with Tyson around the breakdown of their marriage. The fact that those issues were still unresolved after a year was not considered unreasonable. See: Weise v. Weise, 2023 ONSC 5227.

See All News