Let’s assume you and your spouse, whether common-law or married, own your home as joint tenants and you each paid an equal amount towards the down payment. If that’s the case, then if you separate you will each get your half of the down payment back when you sell the home and split the net proceeds of sale (or if your spouse buys you out of the home).
Where things get tricky is if one spouse paid an unequal share of the down payment, or even the entire down payment themselves, but the home is still owned jointly. What happens when you separate? Will you get your down payment back? Or will your down payment be considered a gift to your spouse?
Like most property division issues in Ontario, how the law treats the issue is different depending on whether you were married or not.
Common-law spouses (Unmarried)
The legal principle of resulting trust says that where a person makes a gratuitous transfer of property for no consideration – such as paying the down payment on a house that is jointly owned – then the person who received the gratuitous transfer is just holding the property in trust for the actual/beneficial owner. This is because the law of equity presumes bargains, not gifts (Pecore v Pecore, 2007 SCC 17 at paras 24-25).
However, the person who received the gratuitous transfer can rebut this presumption by proving that it was indeed intended as a gift. The onus is on the recipient of the transfer to prove it was a gift, which can be difficult to do. It is also important to note that, when determining whether there was a gift or not, the courts will only consider the intention of the person transferring the property at the time it was transferred. Just because you might regret a gift later makes it no less a gift.
Common-law relationships or romantic relationships do not give rise to a presumption of a gift (Zachariadis Estate v Giannopoulos, 2019 ONSC 6505 at para 68). So, that means that common-law spouses have to deal with the presumption of resulting trust when dealing with a down payment issue.
Some have tried to argue that by putting a home into joint names after one common-law spouse pays the entire down payment, or a larger share of it, is proof in and of itself that a gift was intended. A recent Ontario Court of Appeal case confirmed that this is not so. All that is reflected by holding property in joint names is that a right of survivorship arises and that the couple desired to ensure that if one of them predeceased the other, the home would go to the surviving partner. The Court held that a right of survivorship can be separated from the intent to gift (MacIntyre v Winter, 2021 ONCA 516 at paras 32-33).
The Court also confirmed that the absence of some type of contract or agreement outlining that the payment was a loan and had to be repaid is also not proof that it was intended as a gift. The Court appreciated that in domestic, romantic relationships, people rarely turn their minds to such commercial issues (MacIntyre v Winter, 2021 ONCA 516 at para 38).
So, if one common-law spouse paid most or all of the down payment towards a jointly held home, you can presume they will need to be paid back that amount if the spouses separate – unless you have convincing evidence that it was intended as a gift.
Married spouses
Interestingly, the presumption is flipped for married spouses.
Section 14 of the Family Law Act reverses the burden and presumes that if property was registered in joint tenancy, then it was intended to actually be jointly owned. This means that the spouse who paid for the property and disputes the beneficial joint ownership is the one who is required to provide “evidence to the contrary.”
In other words, if a married spouse pays the down payment on a home that is then put into joint ownership with their spouse, then we presume they intended to gift the payment to their spouse. The spouse who paid the down payment would then have to prove they did not intend a gift in order to recoup the down payment on separation.
What is the lesson to be learned?
It is a good idea to speak to a family law lawyer before you purchase the home to ensure you understand your rights and obligations. If it is needed, you can enter into a Cohabitation Agreement or Marriage Contract with your spouse. In the Agreement, you and your spouse can clearly set out what you each intend when purchasing the property and you can agree on how the property will be divided if you ever separate, including how the down payment will be treated.
Do you require assistance with a family law related issue?
Madison Goodacre is a lawyer in Siskinds’ Family Law Department. If you are going through a separation and need assistance with a property division issue, or if you need assistance with any other family law matter, please contact Madison by email.