Contributing to the Purchase of Property for your Child? What You Should Both Know First

Toronto real estate prices are at an all-time high and many first-time buyers require financial assistance to make their first purchase. This assistance often comes from parents. While these arrangements can be hugely helpful to the recipients, there are potential family law issues of which both contributors and recipients should be aware.

While a parent may be happy to assist their child in getting on the property ladder, these feelings may change if the child then separates from his or her spouse, who may be entitled to share in the value of the property, regardless of the parent’s contribution. If the marriage is short, the parent’s contribution was significant or the property value has increased substantially, this can add to the frustration. Laws that allow parties not to share gifts received during the marriage do not apply if those gifts were invested into a matrimonial home.

Another potential issue may arise where it is unclear whether the parent’s contribution is a gift or an investment in the property. While title to the property may be evidence as to who was the intended owner, a party may have a claim to a portion of the value of a property as a result of having contributed to it financially, despite not being on title. The uncertainty that arises from such a claim is potentially expensive and stressful.

Both of these issues may be avoided if parties clearly set out their expectations, mutual responsibilities to one another and how the property would be dealt with under the law if a separation should occur. They may even wish to draft an agreement which establishes that the property will be dealt with in accordance with their wishes rather than with the default scheme provided by the law.

Being informed and developing a plan before the purchase can help avoid the significant expense, stress and time of a legal claim down the road. A family lawyer can assist parties in understanding potential complications that could arise in the future and advise on how best to safeguard against them.