Sunday, July 15, 2012

Can a Six-year Old Own Real Estate in British Columbia?

I was reading a recent Supreme Court of British Columbia decision in which the plaintiff had transferred his house in Burnaby, B.C. into a joint tenancy with a family member, and then sued to get the title back. I have written before about the risks of transferring your residence into a joint tenancy with a child or other family member to avoid probate fees, and there is no shortage of lawsuits over joint tenancies. But what makes this case particularly interesting to me is that when Yuk Pui Wong transferred his house into a joint tenancy with his brother’s grandson Michael Huang, Michael was just 6 years old, and is as at the date of trial, 12.

Yuk Wong was separated from his wife and estranged from his children, when Michael Huang was born. He wrote to his brother and to Michael’s mother saying that he had signed a transfer to transfer a 50% interest in his house to Michael. In his letter to his brother, he wrote that this is the most economical way to transfer the house so that Michael would own it on Yuk Wong’s death.

In 2006, Yuk Wong registered the transfer of his house at the Land Title Office. He wrote to Michael Huang’s mother advising her that Michael was now a co-owner of the house. He also asked Michael’s family to send him a cheque for $4000 to pay the property transfer tax on the transfer, and then a further $1400 when the assessment authority assessed the property transfer tax for an addition $1400. Michael’s family complied with his requests.

In June 2010, Yuk Wong wrote to his brother requesting the title to the half-interest back or cash. He said in an affidavit file in court he felt that the family bond he had hoped for does not exist.

After negotiations broke down, Yuk Wong sued seeking a return of his half-interest. When one person transfers real estate (or other assets) gratuitously into the name of another, there is a presumption that the person who receives title holds the title in trust for the person who transferred the title. This is known as a presumption of resulting trust.

The presumption of resulting trust is a presumption only, and the person receiving title may rebut that presumption with evidence that the person who made the transfer, in this case Yuk Wong, intended at the time of the transfer to make a gift.

Yuk Wong asked the Supreme Court of British Columbia to find that his great-nephew Michael Huang held his half-interest in a resulting trust, and asked for an order that it be transferred back into his name.

Mr. Justice Ehrcke, in Wong v. Huang, 2012 BCSC 975, however, found that at the time of the transfer Yuk Wong intended a gift, but then later changed his mind. The letters that Yuk Wong wrote were evidence of his intention that Michael would own the property for himself, rather than hold it in trust for Mr. Wong. Furthermore, it would not make sense fro Yuk Wong to ask Michael Huang’s family to pay the property transfer tax if Michael were not going to benefit from the transfer. Once the gift was completed by the transfer, Yuk Wong was not legally entitled to its return if he changed his mind.

This brings me back to the question of whether a minor (someone under 19 years in British Columbia) can have title to real estate in B.C. The answer is yes, but it can be extremely inconvenient.

Apart from his change of heart, supposing Michael Huang needed to sell the house and use some of the proceeds for a care facility. I note that he is 86 and his receiving home care. How could he sell the house to a purchaser? If Michael were an adult, he could join in the sale, but as a minor he doesn’t have the legal capacity to contract to sell an interest in real estate.

If a minor has title to real estate in B.C. and application must be made to the Supreme Court of British Columbia to authorize the sale. 

Section 2 of the Infants Act allows the Public Guardian and Trustee of British Columbia to apply to sell a minor’s real estate, and the court may authorize the sale if the Court,
(a) is of the opinion that the disposition is expedient, necessary or proper in the interests of the infant or for the infant's maintenance or education, or 
(b) is satisfied that part of the land is wasting, dilapidating or depreciating from any cause and the infant's interest requires the disposition or will be substantially promoted by the disposition.
According to the Public Guardian and Trustee of British Columbia’s website here, a minor’s parents may also make the application on notice to the Public Guardian and Trustee.

If a minor owns less than a 100% interest in the real estate, an application could be brought under the Partition of Property Act.  

In either case, selling real estate held in a minor’s name involves the expense of a court application.

I have difficulty conceiving of circumstances where it makes sense to transfer real estate or an interest in real estate to a minor. If you want to benefit a minor, the better course is to transfer the real estate to a trustee, employing a well-thought out and well-drafted trust agreement, preserving the flexibility to sell, lease or mortgage the real estate, and perhaps (after receiving tax advice) the ability to change the beneficiary.

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