Selling a property can be fraught with difficulty. From ensuring your property is ready for sale, to understanding your obligations as a seller, numerous legal hoops exist. One important factor to keep in mind is how the proceeds will be distributed after the sale if there are multiple interested parties, such as in cases involving a multi-generational home. In light of Ontario’s housing crisis, this factual scenario may become more common in the coming years.
In Sidhu v. Sidhu, the Ontario Superior Court of Justice was presented with such a scenario. This case sheds light on how the Court will apply equitable remedies to resolve disputes over who is entitled to the proceeds of sale.
In Ontario, unjust enrichment is a legal principle that aims to prevent one party from benefiting unfairly at the expense of another. It occurs when someone gains an advantage or receives a benefit without a legal justification, and it would be unfair to allow them to keep that benefit. The current test for unjust enrichment involves the court considering the following factors:
- Whether one party was enriched;
- Whether there was a corresponding deprivation to the other party; and
- Whether there is a juristic reason for the benefit and corresponding detriment (i.e., legal and policy issues that should allow such a benefit).
In the case at hand, one party claimed that the other was unjustly enriched due to a shared residence being sold. If the court agreed, the party claiming would be entitled to a 50% interest in the proceeds gained from the sale.
The matter in Sidhu v. Sidhu involved a dispute between the matriarch of a family, the applicant/cross-respondent, and her eldest son and daughter-in-law, the respondents/ cross-applicants, over the proceeds of the sale of a property. The applicant purchased the property in 2004, and she was subsequently the sole title holder. The respondents moved into the property shortly after.
As part of the living arrangements, it was agreed between the parties that her son, one of the respondents, would act as the house manager. He also managed the family bank account, which he used to manage the property.
In 2015, the family started to argue about the property. In response to a threat by the respondents that they would move out and stop managing the property, the respondents alleged that the applicant would only retain a $250,000 interest in the property if they stayed. The applicant denies this allegation. Eventually, due to disagreements, the applicant asked the respondents to move out, but they refused, claiming an interest in the property.
On August 31, 2022, the application brought an application for partition and sale of the property, and the respondents brought a cross-application claiming unjust enrichment and a 50% interest. Not long after, the property was sold, and the parties could not agree on how to distribute the majority of the proceeds.
The respondents claimed they were entitled to 50% based on their contributions to the mortgage and maintenance costs. The applicant claimed that she was entitled to 100%, and the financial contributions made by the respondents constituted rent.
The Court found that the applicant was not unjustly enriched, as both parties had benefited from the arrangement. In applying the three-prong test, the Court noted no evidence to support the applicant’s enrichment and the respondents’ corresponding deprivation. The parties “knowingly and intentionally organized their affairs to meet their own unique needs.”
The applicant benefited from the respondents’ property management, especially since she had recently fallen ill and could not contribute as much to the joint family account. There is no doubt of the applicant’s benefit. However, the respondents also benefited by saving money that would have otherwise been used to pay rent elsewhere, both for residential and commercial means, as they also operated their respective businesses out of the property. As to the respondents’ claim that they incurred expenses on behalf of the property, the judge found no evidence to support this claim. In fact, the judge ruled that it was more likely that they had paid for these expenses using the joint family account.
Overall, the judge totaled the respondents’ contributions to the joint family account and subtracted the amount they paid for rent and the benefits they accrued through their corporation. The leftover amount clearly demonstrated that the respondents were not deprived in any way. Therefore, the applicant was not unjustly enriched, and the judge found that the applicant was entitled to all of the property sale proceeds.
This case highlights the complexity of selling a multi-generational home. It is conceivable that the judge might have ruled differently if the respondents had been deprived rather than benefited. Therefore, if living in a similar arrangement, it is crucial to consider each party’s contributions to the home to avoid such a dispute.
Buying and selling real estate is often one of the most significant financial transactions a person or company will make in their lifetime. Hiring a law firm with adequate experience, skills, and resources is important to ensure that you feel confident that your interests are protected and your transaction closes smoothly.
At Bader Law, our trusted real estate lawyers represent individual and corporate parties in both residential and commercial real estate transactions in Mississauga and throughout the Greater Toronto Area. Our team will advise you on your options, help secure your interests, and work to protect your financial investments. To learn more about how we can ensure your real estate needs are met, contact us online or at (289) 652-9092.