Transfer of Title to Land Held in an Unregistered Trust on the Death of the Trustee

[Since I wrote this article, the British Columbia Court of Appeal has overturned the Supreme Court of British Columbia decision discussed below. The Court of Appeal decision in Smith v. Graham is reported at 2009 BCCA 192. Accordingly, you may not rely on the process described in this article for transferring title of land held in an unregistered trust to an executor of a will, thereby avoiding both probate fees or property transfer tax.]

Suppose you own land in British Columbia. You would like to transfer the land to a trustee in trust for yourself and other family members. You don’t want to pay property transfer tax when you set up the trust. Accordingly, you sign a document declaring that you know hold the land in trust, but you do not change the registration of the title to the land to reflect the fact that you are now holding it in trust.

On your death, can your executor apply for probate declaring that the value of your interest in the land as trust is nil, and then, once probate is granted, require the Land Title Office to register the land in the executor’s name?

For many years, the Registrar of the Land Title Offices in British Columbia said the executor can’t. The Registrar required that a successor trustee must be appointed under the terms of the trust, and then the title would have to be registered in the trust. Often, the Registrar required a court order vesting title in the successor trustee before changing the registration of title. (Although the one time I had to deal with this issue, the Registrar did not require a court order.)

In a decision released yesterday, Madam Justice Sinclair Prowse held that the Registrar of the Land Title Office is wrong. She reasoned that the Land Title Act , RSBC 1996, c. 250, does not require the registered owner to register the land in trust if he or she holds it in trust. The deceased owner’s interest in the land, even if the deceased was only holding title as a trustee, passes to the executor or administrator. Once the court issues probate or letters of administration, the executor or administrator is entitled to have the title transferred into his or her name in a representative capacity.

Madam Justice Prowse did not see any difficulty with the executor declaring that the deceased’s interest in the property had no value in the application for probate even if the land is worth several hundred thousand dollars. Although the value of the land might be significant, the value of the deceased’s interest in the land is not. The deceased held the land at death for the use and enjoyment of the beneficiaries of the trust, and not for himself.

Madam Justice Prowse made this decision in Graham v. Smith, 2008 BCSC 348, after hearing two appeals from the Registrar’s decisions.

This decision makes estate planning with land easier. You can transfer land into a trust during your lifetime without paying the land transfer tax (one percent of the first $200,000 and two percent of the amount by which the value of the land exceeds $200,000). You do need to keep in mind the potential tax issues that may arise under the Income Tax Act.

On your death, your executor will have to probate your will to deal with your land. But the executor will save probate fees on the value of the land, because your interest in the land at death may be nil.

[Please see my disclaimer at the beginning of this post. The process I have described no longer works. This decision has been reversed by the B.C. Court of Appeal.]

When Does a Common Law Relationship End?

About eight years ago, the British Columbia legislature amended the definition of spouse in a number of different laws to give common law spouses similar rights to married spouses on the death of one of the spouses. But, unlike married spouses, common law spouses can’t divorce each other. This raises the question about when do common law spouses cease to be common law spouses.

In Gosbjorn v. Hadley, 2008 BCSC 219, Christine Gosbjorn lived in a marriage-like relationship with Terrance George Krompocker for twelve years. Mr. Krompocker had two adult children from his first marriage.

Ms. Gosbjorn and Mr. Krompocker had some difficulties in their relationship, and on February 18, 2006, Ms. Gosbjorn moved out of the house they owned together, and into a basement suite. She took some, but not all, of her possessions with her.

When they separated, Mr. Krompocker suggested to some people that the separation was temporary, and to others that it was permanent.

On February 24, 2006—six days after Ms. Gosbjorn moved out of the house—Mr. Krompocker died tragically.

He did not have a will.

Under Part 10 of the Estate Administration Act, if Ms. Gosbjorn was Mr. Krompocker’s common law spouse at the time of his death, she would be entitled to the first $65,000 and one-half of the balance of Mr. Krompocker’s estate. She would also be entitled to a life-interest in his share of the matrimonial home, and to the household furnishings. Mr. Krompocker’s children would be entitled to the rest.

If Ms. Gosbjorn was not Mr. Krompocker’s common law spouse, then his children would be entitled to his whole estate.

Under the Estate Administration Act, the definition of spouse in section 1 includes a common law spouse. The definition of common law spouse includes “a person who has lived and cohabited with another person in a marriage-like relationship, including a marriage-like relationship between persons of the same gender, for a period of at least 2 years immediately before the other person's death.”

Mr. Krompocker’s children argued that because he and Ms. Gosbjorn had separated before Mr. Krompocker died, she was not his common law spouse immediately before his death.

Ms. Gosbjorn argued that provisions of the Charter of Rights required the court to interpret the legislation in a way that treats legally married spouses the same way as common law spouses. She pointed to section 98 of the Estate Administration Act, which provides that unless the court orders otherwise, a spouse who had been separated for more than a year from the deceased was not entitled to a share of the estate of a person dying without a will. She argued that unless a common law spouse who had been separated from the deceased for less than one year is entitled to a share of the estate of the deceased, the effect would be to discriminate against common law spouses.

Madam Justice Gray distinguished between common law spouses who had merely separated, and those whose common law relationship had ended. Common law spouses who had ended their relationship are comparable to divorced spouses. Neither a common law spouse whose relationship had ended within one year of the deceased’s death, or a spouse who was divorced within a year of the deceased’s death, are entitled to a share of the deceased’s estate if the deceased did not have a will.

How do you determine if when the relationship has ended? Madam Justice Gray wrote that, “parties cease to live and cohabit in a marriage-like relationship when either party regards the relationship to be at an end, and by his or her conduct, demonstrates in a convincing manner that this particular state of mind is a settled one.”

In this case Madam Justice Gray found that “neither Mr. Krompocker nor Ms. Gosbjorn demonstrated that he or she had a settled intention to end the relationship.” Accordingly, Ms. Gosbjorn continued to live in a marriage-like relationship with Mr. Krompocker up to his death despite her move to a basement suite the week before his death.

Ms. Gosbjorn is entitled to a share of Mr. Krompocker's estate.

Tomlyn v. Kennedy

I have just finished reading a very sad and tragic Wills Variation Act case released last week.

Pauline Herchenson had three children. The Government of Alberta took all three children away from her when they were babies in 1945. She had no contact with them after that. She did not know what became of her children.

She later married, but did not have any more children.

Ms. Herchenson did not forget her children. In her will, made many years later, she made an interesting provision. She left the residue of her estate, after payment of a number of specific bequests, to her three children if the executor could find them within a year of her death. She directed the executor to make reasonable efforts to locate them. If any had died before her, the deceased child’s gift would go to his or her own children.

Ms. Herchenson died in 2003, as a resident of British Columbia.

The executor did locate the children. One child had been adopted, and died before Ms. Herchenson. He had four children who were entitled to his share under the will. The other two children had not been adopted, and were both alive.

Although Ms. Herchenson made some provision for her children in her will, she also left a significant amount to various other relatives, friends and a charity. The effect was that out of an estate of about $680,000 at trial, after payment of taxes and other expenses and the gifts to the other beneficiaries, there would be about $230,000 left for the two living children and the four children of the deceased child.

One child, Michael Jon Tomlyn, brought a claim for a greater share of the estate under British Columbia’s Wills Variation Act, R.S.B.C. 1996, c. 490, alleging that his mother had not made adequate provision for him. He argued that she had failed in her moral obligations to him.

After he was taken from his mother, Michael Tomlyn was in foster care until eight years of age. The Alberta Government then labelled him as mentally defective (there is no indication in the judgment that the label was in any way valid), had him sterilized at 12, and kept him in a provincial training school until he was 26.

At the time of trial he was in his 60s. He was married. He had no significant assets and was unemployable.

His brother was also in his 60s, married, and had a modest income.

When this case went to a summary trial, one of the beneficiaries argued that the moral claim of the two living children was “neither strong nor compelling.” Mr. Justice Brooke in Tomlyn v. Kennedy, 2008 BCSC 331, disagreed.

In reaching his decision Mr. Justice Brooke eloquently discussed the nature of a parent’s moral obligation to a child, and how it was not met in this case, at paragraphs 29 and 30 as follows:

The moral obligation of a testator to a child must be seen as commencing when the child is born. The law of nature leaves each child utterly dependent upon his or her mother during infancy and, by extension, to childhood and later years a diminishing dependency. The testatrix failed her children terribly. We do not know her circumstances or the reasons for that failure, but we are left with the fact that the care of the children was placed with the apparatus of the state. We know nothing of the testatrix’s conduct while the children were in her care, but we do know the sad history that unfolded after they were apprehended by the Ministry. While such a challenging beginning does not invariably lead to a blighted life, that does seem to have been the lot of the children of the testatrix. The plaintiff was placed in foster care until he was placed involuntarily in an institution, where he was sterilized, and from which he escaped by marrying. He neither had the comfort and support of a mother or brothers but was left to his own slim resources to make his way in a competitive and sometimes cold and hostile world. He was even denied the joys and the comfort of children of his own. He now finds himself one of life’s wounded.

His brother, Francis, did not suffer incarceration and involuntary sterilization but he, too, grew up without parents, without siblings and without an extended family – all of which may be expected to provide affection, support and encouragement, not only during childhood but throughout his life. He, too, finds himself much, much wounded by his beginnings.

Mr. Justice Brooke increased the provision for plaintiff, Michael Tomlyn to $175,000 and for his brother Francis Tomlyn to $125,000.

Crowley v. Walkhouse

In British Columbia, if a parent does not make adequate provision in her will for an adult child, the child may sue under the Wills Variation Act. If successful, the court will make an award that the court considers adequate, just and equitable in the circumstances. Will the court award an adult child who is completely disinherited with a larger share of the estate than it would if the same child’s parent had left him a modest portion of her estate?

In Crowley v. Walkhouse, 2008 BCSC 319, Lillian Crowley left her only child, Barry Crowley, a quarter of her $1 million estate in her will. She left a quarter to her granddaughter, and one tenth of her estate to each of her church, a niece, two nephews and a sister-in-law.

Her son made a Wills Variation Act claim, seeking 50 to 60 percent of the estate. He was 70 years old, retired and financially self-sufficient.

Barry Crowley and his mother were estranged, not having any contact during the last ten years of her life. He had left home at 15, been in prison, and rejected his mother’s religion. They had a final falling out when his mother sold his father’s tools, after his father’s death, instead of giving the plaintiff the tools.

The plaintiff son argued that his mother had a moral obligation to provide him with a greater share of his estate. He referred to another case, Baulne v. Burtch (19 December 2002) Kelowna Registry no. 56281 (BCSC), in which the court awarded an independent adult son who had been estranged from his parents 60 percent of his parents’ estates. The combined value of the estates in Baulne was about $500,000.

Mr. Justice Rogers distinguished the Baulne case principally on the basis that in Baulne the plaintiff son’s parents had completely disinherited him. The court, having found that the parents had not made adequate provision for the son, then had to decide on an appropriate percentage.

In contrast, in Crowley, the plaintiff’s mother had left a quarter of her estate to her son. The issue then was whether that quarter falls within an acceptable range. Mr. Justice Rogers wrote,

The most salient point of departure between the two cases is that, in Baulne, the court was not faced with having to decide whether the gift that was, in fact, given to the plaintiff lay within that “range of options” that the Supreme Court in Tataryn allowed could be appropriate. Instead, Beames J. had to act as the testator herself; she had to pick a percentage of participation out of the range of percentages that were available to choose from. Beames J. did not say, and was not obliged to say, whether the number she chose was at the top, middle or bottom of the range.

Mr. Justice Rogers found that a quarter of the estate was in the low end of the acceptable range. He wrote:

Turning again to Tataryn, I must ask myself what range of gifts to the plaintiff could satisfy society’s reasonable expectations of what a judicious person would do in Mrs. Crowley’s place? Would a one-quarter share of $1 million be enough to meet those expectations? Put another way, would a $250,000 to a 70-year-old man, who owns clear title to three properties and has modest savings, a modest lifestyle that is in keeping with the modest lifestyle his parents followed, and an income sufficient to met his needs, and in whom the testator was, with good reason, disappointed, offend the sensibilities of an impartial observer? The answer to that question must, in my opinion, be no. That gift is, I think, at the low end of the acceptable range, but it is within the range and it should not be disturbed.

The implication is that if Mr. Crowley’s mother had disinherited him, or left him with significantly less than a quarter of her estate, the court might have awarded him more than a quarter of the estate.

Family Caregiving Study

The British Columbia Law Institute and the Canadian Centre for Elder Law Studies are undertaking a study of law relating to caregiving of family members. According to the project summary,

This two year research project funded by the Law Foundation of BC will examine the current legal framework governing leave, accommodation and other entitlements available to employees and other working people who are also engaged in providing care for family members. The focus of this project will be the care of elderly parents, grandparents and disabled adult children, acknowledging the care needs of adults living with mental health issues, physical and developmental disabilities, addictions and long term illnesses as well as the corresponding challenge facing their caregivers, who must balance caregiving and paid employment responsibilities and often suffer significant economic disadvantages when they assume caregiving tasks.

The project goals:

Our work will culminate in a joint BC Law Institute and Canadian Centre for Elder Law study paper detailing the various legal issues arising from the need for employment leave for the purpose of family caregiving and will include recommendations for law reform. We will also be creating tools for educating British Columbians about their rights as caregivers with the hopes of empowering caregivers to access existing benefits that can support them in their role as caregivers.

They welcome comments, which may be emailed to familycare@bcli.org.

Life Insurance Beneficiary Designations Do Matter

I like to write about court decisions that may go against conventional wisdom.

I think most people, including lawyers and insurance agents, would say that if you designate someone as the beneficiary of your life insurance policy, the beneficiary will be entitled to the proceeds. The rules in British Columbia set out in Part 3 of the Insurance Act, RSBC 1996, c. 226, appear to make written beneficiary designations unassailable.

But, as I wrote in “Life Insurance Policy Beneficiary Designations are not Sacrosanct,” there are cases where the courts have held that a beneficiary is not entitled to keep the insurance benefits.

On the other hand, in many cases, conventional wisdom is right. As I once read on a sign in a cafeteria, “The race doesn't always go to the swift and the strong. But that’s the way to bet.”

Gordon Neilson had little contact with his daughter Kelly Rainsford for many years, as a result of his separation from her mother. He had a very close relationship with his sister.

Mr. Neilson had named his daughter as a beneficiary of his life insurance when she was a child, but later changed the designation to his sister.

A few months before Mr. Neilson died, his daughter reestablished contact with him. He also came to believe that his sister had improperly taken money and some personal effects from him. (The court did not make any findings as to whether the sister had done anything improper.)

Mr. Neilson decided to change the beneficiary of his life insurance, as well as his pension plan and his will to his daughter. He made a new will. He also signed a Public Service Pension Plan Nomination of Beneficiary, naming his daughter as his beneficiary. Mr. Neilson apparently believed that this form would also change his life insurance beneficiary, but he was mistaken.

Mr. Neilson never did complete a new life insurance declaration naming his daughter as his beneficiary.

After Mr. Neilson’s death, both his sister and his daughter claimed to be entitled to the insurance proceeds.

Mr. Justice Masuhara in Rainsford v. Gregoire, 2008 BCSC 310, held that the sister was entitled to the insurance proceeds as the designated beneficiary.

The court considered Ms. Rainsford argument that the insurance policy should be rectified to reflect Mr. Neilson’s intent to change the designation. Mr. Justice Masuhara rejected this argument on the basis rectification would only be available if both Mr. Neilson and the insurer acknowledged a mistake in the policy, which was not the case here.

The court also rejected the argument that Mr. Neilson’s sister held the insurance proceeds on a resulting trust for his estate. The argument is that there is a presumption that a beneficiary who receives insurance proceeds gratuitously holds the funds in trust for the deceased life insurance owner’s estate. The court found that Mr. Neilson did not intend for his daughter to be the beneficiary at the time he signed the beneficiary designation in favour of his sister. (It is implicit in the judgment that the court found that Mr. Neilson intended to make a gift to his sister at the time he designated her as the beneficiary.)

Mr. Justice Masuhara also held that there was no reason in equity to deprive Mr. Neilson’s sister of the insurance proceeds. This case is distinguishable from Roberts v. Martindale Estate, (1998), 55 B.C.L.R. (3d) 63 (C.A.)(discussed in my post “Life Insurance Policy Beneficiary Designations are not Sacrosanct”). In Roberts, the Court of Appeal found that it was against good conscience to allow an ex-spouse who had signed a separation agreement in which he expressly gave up any claim to any benefits on his former wife’s death to keep the insurance proceeds.

Rainsford highlights how important it is to sign a change of beneficiary designation form if you want to change the beneficiary of your life insurance.

Canadian Lawyer Magazine: Top Ten Canadian Law Blogs

Gerry Blackwell has listed his top ten Canadian law blogs in his article "Luminaries of the Canadian Blawgosphere" in the March issue of Canadian Lawyer Magazine. Here is his criteria:

What makes a good blog? The blogger has to be consistent, posting at least weekly. (Some at lawblogs.ca haven’t posted since 2005, but a few post more than once a day.) The writing has to be lively and the site well designed — admittedly subjective measures. Posts should not be dissertations — a common failing among some Canadian blawgers — and the blog should be focused. If it’s about family law, don’t tell us about your vacation.

Finally, most blogs should engage readers and foster discussion. It must be easy to post and read comments. A few Canadian blawgers inexplicably don’t accept comments.

When dipping into a new blawg, I count comments. The more there are, I figure, the more people are reading — a sure sign of a blawg worth reading — and the greater the chances of lively exchanges. That being said, absence of comments, as we’ll see, doesn’t necessarily mean a dull or worthless blog.

His top ten, in no particular order:

MICHAEL GEIST
LAW21
LAW FIRM WEB STRATEGY
eLEGAL
SLAW
THE BIZOP NEWS
TORONTO ESTATE LAW BLOG
LAW IS COOL
LIBRARY BOY
RULE OF LAW

Mr. Blackwell's critique of Rule of Law:

The writing is a little too earnest and workmanlike to draw a huge readership — comments are sparse — but the content appears solid, and the site, created in Google’s Blogger, is attractive.

Now I know what it would feel like if I had an editor!

[I have corrected Mr. Blackwell's name, which I had as "Kirbyson" when I first posted. Perhaps I do need an editor.]

Confidentiality of Examination for Discoveries

In civil lawsuits in British Columbia, you do not have a right to remain silent.

Each party to a lawsuit is entitled to pre-trial disclosure of documents. Each side may question the other under oath at an examination for discovery before trial. The party asking the questions may read in the questions and answers at trial, or may use them to impeach the other party’s testimony at trial during cross examination.

If a party refusing to answer questions at the examination for discovery, the court may order the party to answer the questions. The court can dismiss the party’s claim, or defence, if the party refuses to answer.

On the other hand, there is in British Columbia an implied undertaking that pre-trial document disclosure and examination for discovery evidence may only be used for the purposes of the proceeding. The party conducting an examination for discovery may not give the examination transcripts to someone else not connected with the suit, except with the permission of the person who was examined. This affords some protection to the privacy of the parties to a civil lawsuit. (But if the evidence is read into the trial record, it becomes public.)

The Supreme Court of Canada has affirmed the implied undertaking of confidentiality in a decision released last week, Juman v. Doucette, 2008 SCC 8.

In Juman, the Vancouver police sought information from the discovery of a childcare worker who had been sued after an infant who had been in the childcare worker’s care had suffered a brain injury. The civil suit brought on behalf of the infant had been settled.

The Supreme Court of Canada held that the parties could not release information from the examination of the child care worker to the police without her consent.

Mr. Justice Binnie described the rationale for the implied undertaking of confidentiality.

[24] In the first place, pre-trial discovery is an invasion of a private right to be left alone with your thoughts and papers, however embarrassing, defamatory or scandalous. At least one side in every lawsuit is a reluctant participant. Yet a proper pre-trial discovery is essential to prevent surprise or “litigation by ambush”, to encourage settlement once the facts are known, and to narrow issues even where settlement proves unachievable. Thus, rule 27(22) of the B.C. Rules of Court compels a litigant to answer all relevant questions posed on an examination for discovery. Failure to do so can result in punishment by way of imprisonment or fine pursuant to rules 56(1), 56(4) and 2(5). In some provinces, the rules of practice provide that individuals who are not even parties can be ordered to submit to examination for discovery on issues relevant to a dispute in which they may have no direct interest. It is not uncommon for plaintiff’s counsel aggressively to “sue everyone in sight” not with any realistic hope of recovery but to “get discovery”. Thus, for the out-of-pocket cost of issuing a statement of claim or other process, the gate is swung open to investigate the private information and perhaps highly confidential documents of the examinee in pursuit of allegations that might in the end be found to be without any merit at all.

[25] The public interest in getting at the truth in a civil action outweighs the examinee’s privacy interest, but the latter is nevertheless entitled to a measure of protection. The answers and documents are compelled by statute solely for the purpose of the civil action and the law thus requires that the invasion of privacy should generally be limited to the level of disclosure necessary to satisfy that purpose and that purpose alone. Although the present case involves the issue of self-incrimination of the appellant, that element is not a necessary requirement for protection. Indeed, the disclosed information need not even satisfy the legal requirements of confidentiality set out in Slavutych v. Baker, [1976] 1 S.C.R. 254. The general idea, metaphorically speaking, is that whatever is disclosed in the discovery room stays in the discovery room unless eventually revealed in the courtroom or disclosed by judicial order.

[26] There is a second rationale supporting the existence of an implied undertaking. A litigant who has some assurance that the documents and answers will not be used for a purpose collateral or ulterior to the proceedings in which they are demanded will be encouraged to provide a more complete and candid discovery. This is of particular interest in an era where documentary production is of a magnitude (“litigation by avalanche”) as often to preclude careful pre-screening by the individuals or corporations making production. See Kyuquot Logging Ltd. v. British Columbia Forest Products Ltd. (1986), 5 B.C.L.R. (2d) 1 (C.A.), per Esson J.A. dissenting, at pp. 10-11.

But the privacy protections may not be as strong as they might first appear.

The Court said that there are some exceptions where the public interest may override confidentiality. These include statutory exceptions, public safety concerns, and impeachment of inconsistent testimony in another proceeding.

Mr. Justice Binnie also said that the police could apply for a warrant to obtain discovery evidence (if there are sufficient grounds) or subpoena documents disclosed in the discovery process at a criminal trial.

CBA National Wills and Estates Section Meeting

Last weekend I attended the Canadian Bar Association, Wills and Estates section executive meeting in Toronto.

Most law affecting wills and estate is provincial, and our provincial laws can vary substantially from province to province. The variations make these meetings quite interesting. I learnt a great deal from other lawyers from across Canada about the laws of other provinces.

But the fact that so much of the law affecting our estate practices is provincial presents a challenge to a national section. The section needs to identify matters that transcend provincial differences.

I think that the national section executive does a very good job of addressing matters of national scope. (I am not a member of the executive, having attended the meeting as a representative the British Columbia sections.) The national section has identified a number of federal laws in need of reform.

One reform that the national section has pressed for a few years concerns taxation of Registered Retirement Savings Plans (RRSPs) and Registered Retirement Income Funds (RRIFs). The Income Tax Act, Canada has provisions allowing tax of RRSPs and RRIFs to be deferred on death if the deceased annuitant has designated his or her spouse or common law spouse as the beneficiary of the plan. (I discussed the rules in more detail here.)

But the rules allowing for the deferral of tax do not allow someone to set up a trust for his or her spouse, instead of naming the spouse as the beneficiary. This is unfortunate. Let’s take a husband who is married for a second time. He has children from his first marriage. He may want to let his wife take funds out of his RRSPs after his death, but then provide that any RRSPs left on her death will go to his children. The way the tax law works, he has a choice. He can either leave them to his wife outright, in which case he will not have control over where any funds remaining in the RRSPs will go on her death. Or, he can let the RRSPs fall into his estate, and then provide that the proceeds will be held in trust for his wife during her lifetime, with what remains of the capital going to his children on his wife’s death. But if he chooses to have the proceeds held in a trust for his wife during her lifetime only, he will lose the ability to defer tax on the RRSPs after his death. Instead, he will be deemed to have cashed in the RRSPs at death, and his personal representative will have to pay tax on the RRSPs out of the estate. The tax may be substantial.

The national executive has been working toward a reform of the Income Tax Act to allow a deferral of tax on RRSPs and RRIFs if they are held in a spousal trust. The idea is that there would be restrictions that provide that only the spouse (including a common-law spouse) would be entitled to any of the RRSPs or RRIFs during his or her lifetime. Tax would be paid as the spouse receives withdraws from the RRSPs or RRIFs. Tax would also be paid on any funds remaining in the RRSPs or RRIFs on the spouse’s death.

Any reform to allow tax deferral on RRSPs and RRIFs held in a spousal trust would likely be revenue neutral to the government, while providing people with greater flexibility for their estate plans.

Study Paper on Predatory Lending Issues in Canada

The Canadian Centre for Elder Law Studies has recently published its "Study Paper on Predatory Lending Issues in Canada." Here is an excerpt from the Executive Summary:

Predatory lending is the practice whereby a lender deceptively persuades a borrower to agree to abusive loan terms. It is closely tied to the concept of subprime mortgage lending, which is the practice of making loans to borrowers who do not qualify for the best market interest rates (people with poor or non-existent credit history or low income). A lender may be expected to require less favourable loan terms in exchange for dealing with a comparatively more risky borrower. But, if the surrounding circumstances include a vulnerable borrower easily taken advantage of due to their own desperate financial circumstances, the situation may be characterized as predatory. Although anyone could be a victim of predatory lending, older adults often fit the profile of having a scant (or even non-existent) credit history, low income, and financial need, all of which predatory lenders tend to seek out.

Predatory lending is a well-known phenomenon in the United States but it is much less known in Canada. This study paper explores the reasons for its low profile, namely the underlying assumptions that the structure established by both the Canadian mortgage market and Canadian legislation are such that there is little cause for concern. The study paper’s focus is primarily on how predatory lending may affect older homeowners, but similar issues may arise in connection with individuals who are purchasing a home and obtaining a new mortgage.