A Family Loan Implication
The case of Rotstein and Rotstein v. Magerman and Rotstein, 2019 ONSC 943 (Ont. S.C.J.) serves as a cautionary tale for parents who wish to provide loans or gift monies to assist their children with purchasing a home.
The couple purchased the matrimonial home on July 14, 2003, prior to their marriage. The wife’s parents advanced monies to the couple by way of a mortgage in the sum of $318,000; without interest and payable on demand. The mortgage was registered on July 14, 2003, as well.
The couple never made any payments on the mortgage for either the principal or interest, and no acknowledgement was ever provided by the couple to the parents acknowledging the mortgage debt. The parents made their first demand for payment of the mortgage debt on July 31, 2015, over 12 years after the mortgage was executed and registered.
The wife sought summary judgment dismissing the action brought by her parents. She also sought an Order declaring the mortgage null and void and unenforceable. Alternatively, she sought a temporary injunction preventing her parents from taking possession of or selling the matrimonial home, and costs on a substantial indemnity basis.
On a cross-motion, the parents sought summary judgment and costs of the action on a substantial indemnity basis.
The issues before the court were as follows:
- Should the parents’ claim be dismissed as statute-barred because the action was commenced more than 10 years after the mortgage was executed and registered?
- Is there a genuine issue requiring trial?
The judge accepted that a ten-year limitation period applied as per the Real Property Limitations Act, RSO 1990. As established in the case of Mortgage Insurance Co. of Canada v. Grant, and based on the facts of this case, the judge also found that the cause of action accrued upon execution of the demand mortgage.
Furthermore, the judge found that the cause of action arose when the mortgage was executed and monies were advanced in July 2003. This means that the cause of action expired in 2013. As such, there was no genuine issue for trial, and the mortgage was found to be invalid. The parents’ claim was dismissed.
This case highlights that in the event of a demand mortgage being in place, a demand and claim must be made within the limitation period. Alternately, the mortgagee should have the mortgagor acknowledge the existence of the mortgage debt within the limitation period.
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