Recent Court Decision On Gift Letters- Ask a Vancouver Mortgage Broker

The following was written by Calgary real estate lawyer, William (Bill) Fric, regarding an Alberta Court of Queen’s Bench  judgement from earlier this month. (Citation: Henderson-Jorgensen v Henderson-Jorgensen, 2013 ABQB 213)

Gift letters are often required by mortgage companies when parents are helping children buy a home. Mortgage companies want to see that the down payment either comes from the borrowers’ own resources or has been gifted.

In a case decided last week, a father had made a gift of $83,500.00 on the purchase of property by his son and daughter in-law. Later, the son and daughter in-law divorced. In the legal action to divide the matrimonial property, the father said that the gift was intended solely as a gift to his son. Alternatively, he told the Court that it should be treated as a loan. Otherwise, the wife stood to receive $41,750.00, one half of the gift, on dissolution of the marriage.

In this case the Alberta Court of Queen’s Bench agreed with the wife. They treated the $83,500.00 down payment from the husband’s father as a gift to both the husband and wife and therefore the wife got her $41,750.00. But the Court decision leaves it open to specify that a gift is to one child only.

So your clients may want to be very precise when they do a gift letter, and may want to keep a copy for future use!

William H. Fric
Fric, Lowenstein & Co.
Barristers & Solicitors
#420, 1925 – 18 Avenue N.E.
Calgary, Alberta T2E 7T8
www.friclowenstein.com
Telephone (403) 291-2594
Fax (403) 291- 2668

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There are a number of other considerations to take into account when parents help children buy real estate, and I’ll follow up with William Fric’s future posts on ways to structure these transactions.

To read the court’s judgement in its entirety, click here