Presumption of Resulting Trust in Ontario Property and Mortgage Co-Signing
In Ontario, the presumption of resulting trust plays a crucial role in property law, especially when it comes to situations where someone is added to the title of a property or co-signs a mortgage without contributing financially. Understanding this legal concept can protect property owners and clarify ownership rights when disputes arise.
What Is the Presumption of Resulting Trust?
The presumption of resulting trust arises when one person transfers property to another without intending to gift the beneficial interest. Instead, the beneficial ownership “results” back to the original owner (the Transferor). This usually occurs in two main situations:
- Gratuitous transfer of property without any consideration or payment.
- Joint contribution towards acquiring property but title is in only one person’s name.
In both scenarios, because there was no payment or consideration, the law presumes the recipient holds the property in trust for the true owner.
Mortgage Co-Signing and Property Ownership in Ontario
Co-Signing Does Not Equal Ownership
In Ontario, merely assuming the risk of a mortgage by co-signing does not amount to consideration. This means that if a person is added to a property’s title solely to help qualify for a mortgage but does not contribute to the mortgage payments, upkeep, or acquisition, their ownership interest is presumed to be held in trust for the person who actually paid for or acquired the property.
Gratuitous Transfer and Resulting Trust
When a property transfer is gratuitous—meaning without exchange of value—the law presumes a resulting trust. This protects the original owner by ensuring beneficial ownership does not unintentionally transfer to someone who provided no consideration.
How to Rebut the Presumption of Resulting Trust
To challenge the presumption, the person claiming ownership must provide sufficient evidence that the transferor intended to gift them a beneficial interest in the property at the time of transfer. This is often difficult and requires proof on a balance of probabilities.
- Evidence must focus on the transferor’s intention at the time of transfer.
- Subsequent statements or changes of intention after the transfer are scrutinized carefully.
- The court guards against self-serving or after-the-fact evidence that attempts to change the initial intention.
Presumption of Joint Tenancy Between Married Spouses
Under section 14 of Ontario’s Family Law Act, married spouses are presumed to hold property as joint tenants. This means each spouse owns the whole property together, with rights of survivorship. However, this presumption can be rebutted by evidence that the title interest is a gratuitous transfer, not an intended gift.
- Spouse challenging joint tenancy bears the burden of proof.
- Intention behind property ownership is key.
- Often intention must be inferred from circumstances due to lack of explicit agreements.
Summary Table: Presumption Types and Rebuttal
| Situation | Presumption | Who Bears Onus to Rebut? | Key Evidence Required |
|---|---|---|---|
| Gratuitous Property Transfer | Resulting Trust in favour of Transferor | Transferee (person receiving property) | Intention to gift beneficial interest at transfer |
| Joint Contribution but Title in One Name | Resulting Trust in favour of contributor | Person claiming beneficial interest | Contribution to acquisition costs |
| Married Spouses Holding Property | Joint Tenancy presumed | Challenger of joint tenancy | Evidence of gratuitous transfer or lack of gift intention |
Frequently Asked Questions (FAQs)
1. What does ‘presumption of resulting trust’ mean in Ontario property law?
It means when property is transferred without payment or intention to gift, the beneficial ownership is presumed to revert to the original owner.
2. Does co-signing a mortgage give ownership rights in the property?
No. Co-signing alone does not amount to consideration or ownership if the co-signer does not contribute financially.
3. How can someone prove they were intended to receive a gift of property?
They must show clear evidence that the transferor intended to give them beneficial ownership at the time of transfer.
4. How does joint tenancy affect married spouses’ property rights?
Married spouses are presumed to hold property jointly, meaning each owns the entire property unless proven otherwise.
5. Can the presumption of joint tenancy be challenged?
Yes. If evidence shows the property interest was a gratuitous transfer without gift intention, the presumption can be rebutted.
Conclusion
The presumption of resulting trust is an essential principle in Ontario property law that protects property owners from losing beneficial ownership when property is transferred without proper consideration or intention. Especially in mortgage co-signing scenarios, understanding this presumption ensures that beneficial interests are not inadvertently gifted. If disputes arise, courts will carefully examine the transferor’s intention at the time of transfer to determine rightful ownership. For married spouses, the presumption of joint tenancy provides further protection but can also be challenged with appropriate evidence.
