Who Pays the Mortgage on the Death of a Joint Tenant?

If two people own real estate that they have mortgaged in a joint tenancy, and one of them dies, does the estate of the deceased have to contribute to the mortgage, or does the surviving joint tenant have to pay it all?

Mr. Justice Sigurdson of the Supreme Court of British Columbia considered this issue in Parrott-Ericson v. Stockwell, 2006 BCSC 1409. Helen Parrott-Ericson and her husband, Goran Ericson, borrowed $420,000, which they used to buy two condominiums. They were both responsible to the lender for paying the loans. The loans were secured by mortgages of the condominiums.

Mr. Ericson and Mrs. Parrott-Ericson were registered on title to the condominiums as joint tenants.

When Mr. Ericson died, Mrs. Parrott-Ericson became the sole owner of the condominiums by right-of-survivorship. Mrs. Parrott-Ericson asked the executor of Mr. Ericson's estate to pay one-half of the loans out of Mr. Ericson's estate. When the executor refused, Mrs. Parrott-Ericson sued.

Mr. Justice Sigurdson held that in the circumstances, Mrs. Parrott-Ericson was not entitled to contribution from her husband's estate.

When two or more people are both liable on a loan, the general rule (or in legal terms the prima facie rule) is that they will share it equally, unless they have agreed on some other proportions. If one pays more than an equal share, the person paying more is entitled to contribution from the other debtor or debtors. Otherwise, the other debtor or debtors would be unjustly enriched.

But in this case, the court found that the general rule that each debtor is required to contribute equally does not apply. Because Mrs. Parrott-Ericson has received the benefit of sole ownership of the condominiums, the estate would not be unjustly enriched if Mrs. Parrott-Ericson is required to pay the full amount owing on the loans. It would be unfair to the beneficiaries of Mr. Ericson's estate if they had to bear part of the burden of the debt, without receiving an interest in the condominiums.

In Mr. Justice Sigurdson's words, at paragraph 27,

Here, on the evidence, I find that the mortgage debt and the land were clearly connected in this sense. The joint and several loan was the basis upon which the property was acquired. It was still a substantial burden on the property at the time of the deceased’s death. There was no arrangement that the estate would be liable for one-half of the debt. Of course, equity will impose that obligation in order to avoid unjust enrichment. That is the usual rule, because ordinarily there is unjust enrichment if the liability is not shared. However, here on the facts of the case at bar, I think that, given the joint debt was used to acquire the land and the petitioner received the land entirely, I find that she would be unjustly enriched if the estate had to pay one-half of the debt. On that basis, the petitioner’s claim must fail.

In cases where the surviving joint tenant is also the sole beneficiary of the deceased's estate, and no one is making a claim to vary the will (or some other claim against the estate), this issue will be academic. Mr. Justice Sigurdson's reasons for judgment do not say who is the beneficiary of Mr. Ericson's will, but Mr. Ericson's children from a previous marriage were making claims to vary the will under the Wills Variation Act, RSBC 1996, c. 490. Accordingly, if the estate had to contribute to the loans, the contribution would reduce the amount available to be varied under the will.

This decision does not affect the rights of the lender. The lender could still proceed against the estate to recover the loans if there is a default. If the executor paid some or all of the debts out of the estate, the executor could presumably seek reimbursement from the surviving joint tenant on the grounds that the survivor would be unjustly enriched by the payments. But, if there is a default, the lender is most likely to start foreclosure proceedings, and seek an order for sale of the condominums to pay the loans, in which case the burden will fall on the surviving joint tenant anyway.