The Importance of Putting It on Paper

Is blood really thicker than water? Real estate may be an exception to that rule.

A recent court case in British Columbia illustrates why real estate professionals should advise their clients to put all of an agreement’s details in writing, especially things as potentially complicated as a familial arrangement concerning the splitting of a property’s ownership.

The court case centred on an agreement between a father and a son, which was to split the title of two separate houses, but things went sideways.

• In 2002, the father, agreed to transfer 50 per cent ownership of the property to his son, who also resided there full-time, in exchange for his son paying the expenses. The father would continue paying for all housing costs. This agreement was not in writing and the son was never registered on title.
• Eventually, that property was sold and a new property was purchased, partly with the proceeds of the previous sale and partly with the son’s money. Title to this property was registered in both the father and the son’s names.
• It was the son’s position that since he made the payments on the original property and then on the second property, his father’s portion of the second property was held in trust for his (the son’s) benefit.
• The father’s view was that he was entitled to a 50 per cent ownership in the second property.
• The father sued the son to confirm his 50 per cent ownership in the second property and the son counter sued claiming 100 per cent ownership based on his financial contributions.
• Because of the verbal agreement in 2002, the trial judge found in favour of the son as 100 per cent owner.
• The father appealed to the BC Court of Appeal, and the appeal judge has has sent the case back for another trial, which has yet to occur. The appeal judge had issues with the fact the 2002 agreement between father and son was not written down and may have been gratuitous promises not binding on the father.

The substantial – and ongoing – legal fees in this matter, and the hassles that have arisen, could have been avoided by putting the 2002 arrangement into writing. While there wasn’t a real estate professional involved in this matter, real estate professionals, when working with clients, should remind them of the importance of putting all details in writing – no matter how close the relationship is between the parties to the agreement.

Have you ever had a deal go sideways because of verbal agreements between family members or business partners?