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BC Family Loan and Family Debt Lawyers. Wormeli, MacLean and Perpick

As BC high net worth family lawyers, we are often asked to deal with family property division cases where one spouse’s parents or relatives have contributed substantial sums towards the purchase of the family home.

We are also often asked to determine by one side or the other whether this advance of money was a gift to both spouses that due to marriage breakdown is now sought to be re-characterized as a loan to prevent the divorcing spouse from obtaining a windfall.

In still other cases claims for an unequal division in favour of the spouse whose parents advance the funds are made as well as a claim for repayment of the loan.

When we are approached at the start of the marriage and asked by a spouse how best to protect an advance of funds from their parents towards the purchase of property we recommend either an ownership interest be retained by the parents advancing the monies, a mortgage setting out the amount of their advance and the terms for repayment including interest rates or at a minimum some sort of written documentation which makes it clear what the advance is a gift or a loan.

A further complicating factor is that when parents or relatives advance money for the purchase of the home and then the mortgages obtained from a bank the bank will often seek to have the advance from the family members declared to be a gift as opposed to a loan in order to ensure that the bank has the fullest possible security. This document alone would not automatically convert a loan into a gift because the parents and proposes are essentially forced to make this statement to obtain financing from the bank. It is, however, at a minimum a complicating issue.

Call us if you are involved in a family advance of monies at the start of a relationship or if you are in a dispute over how these monies should be treated upon marriage breakdown.

The recent BC Court of Appeal case of Pasch v. Blackmore British Columbia’s highest court overturned a substantial reapportionment made in favour of the wife given that her parents that advance monies by way of a loan not a gift to purchase a home and that they had foregone payments during periods of time when the parties wish to allocate their money to other expenses. The Court of Appeal held that generosity from parents in the form of a loan did not justify reapportionment in favour of their child when the marriage down but rather decided that the loan would be repaid and the parties would split the  substantial gain made as a result of rising real estate values. The court dealt with the situation of what date should be used to value the husband’s 1/2 interest in the equity in the home at trial had been six-month earlier and real estate values had risen dramatically. The Court of Appeals remanded the matter for determination of the valuation back to the trial court to decide whether to value the interest in the home or to sell the home.

We extract the key parts of the judgment below:

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