Wills, Estates & Trusts

Sister Seeks to Terminate Brother’s Property Lease Following Mother’s Death

March 7, 2024

photo of sale pending sign representing the pending sale when parties disagree on the sale of an estate property

When someone prepares their estate plan, they are asked to make large and important decisions relating to their assets upon their death, including their home. In many cases, leaving a property to a beneficiary is generally straightforward. However, when competing interests are involved, issues can arise.

This blog will consider property-related disputes in light of a recent decision from the Court of King’s Bench of Alberta. In this case, a mother resided in a house that was divided into two suites. Her son and his wife lived in one suite under a lease that was valid for up to 25 years. The mother’s will left the house to her son and her daughter. However, upon learning of the lease, the daughter sought to have it set aside so that the home could be sold. Her sister-in-law sought to continue living in the home under the terms of the lease, which resulted in the parties’ dispute coming before the Court.

Mother asks son and daughter-in-law to live in her home under affordable lease

In the matter of Phillips v Phillips, 2024 ABKB 120, the deceased mother owned a home that was divided into two suites. For a time, one of her children lived in the bottom suite, while she lived in the upstairs suite. When that son passed away, the mother asked her other son and his wife (“DP” and “CP”) to move into the space. This request was made in 2015 and at the time, DP and CP agreed to move back to Alberta.

In 2016, the mother put an estate plan into place with the help of her lawyer. Part of this plan was a lease to allow DP and CP to rent their suite for $1 per month “together with responsibility for separately metered utilities, a $50/month contribution towards common utilities and municipal service charges, and an obligation to reimburse the landlord for 50% of municipal property taxes.” This lease was renewable every five years, with DP and CP given the right to choose to do so.

House conveyed to deceased’s children as tenants in common

At the same time, the mother’s will left the home to DP and his sister “LP” upon her death. She fell ill in March 2018 and passed away not long after. The home was conveyed into DP and LP’s names together as tenants in common. There was “no communication whatsoever” between DP and LP after their mother’s death. DP and CP remained in their unit and paid the entirety of the bills related to the property, including property taxes, insurance, and maintenance. LP, as co-owner, would ordinarily have been responsible for 50% of such bills and maintenance costs.

LP, who had been living in another part of the country, had not paid attention to any mail she had received about the estate. It wasn’t until 2019 that LP opened the mail that she had received and discovered that she owned a 50% interest in her mother’s home. She also learned about the lease that had been put in place for DP and CP. Up until 2021, DP and CP continued to live in one suite, and rented out the upstairs suite along with a portion of the garage, keeping the rent to themselves and not sharing any with LP, who would have been entitled to half of the revenue produced by the property as a co-owner.

Sister seeks to set aside lease

When the lease came up for renewal in 2021, DP and CP advised LP of their intention to exercise the right of renewal and sent her a cheque for half of the five years’ worth of rent, amounting to $30. As LP did not respond, DP and CP treated the lease as renewed and continued to live in their unit. After DP’s mother’s estate had been administered, he conveyed his half-interest in the home to CP as his joint tenant.

In early 2023, DP succumbed to illness and passed away and his estate was left to CP. As such, she took his interest in the home through survivorship and became an equal tenant in common with LP. This resulted in LP’s decision to start an action seeking an order to sell the home and terminate the lease.

Court finds property sale price may be impacted by lease

The Court looked at the lease itself, finding that CP’s right under the lease is to occupy part of the property. Contrary to LP’s claims, this does not diminish LP’s ownership of the home, but rather restricts her use of it. The Court also highlighted the fact that CP was as much of an owner in the home as LP was.

However, the Court also acknowledged that this case presented unique conflicts. Since LP was a 50% owner of the home, which was subject to a lease, this essentially provided her with rent free accommodations. If the house was sold with the lease in place, it would not sell for as high of a price as it would without the lease in place, as evidence was presented to the Court that suggested the sales price might be reduced by approximately 50%.

Court orders parties to work together on sale of property

The Court noted that, while an order could be made to force the sale of the home, it could only be done so with the lease in place, as there was no legal basis for the Court to order a termination of the lease.

As a result, the Court ordered the parties to work together on a sale of the home with the understanding that any sale would allow for the terms of the lease to continue. Specifically, the Court emphasized that LP was entitled to maximize her realization on the property, while the impact of the sale on CP should be minimized given that she resided in the home.

Contact DBB Law in Calgary for Trustworthy Advice on Estate Disputes and Representation in Property Transactions

At DBB Law, our experienced wills and estate lawyers provide our clients with comprehensive estate planning services, including assistance with power of attorney preparation and tax-effective estate planning strategies. We also provide clients with extensive residential property services to ensure your property transaction runs smoothly. From our office in downtown Calgary, we represent clients throughout Alberta. If you have questions about estate litigation, will drafting, or selling estate assets, contact us by phone at 403-265-7777 or online to learn how we can assist you.

Blogs/Firm News

Employment & Labour Law

March 28, 2024

Human Rights Tribunal Addresses Objections to Proposed Witnesses in Discrimination Case

Wills, Estates & Trusts

March 25, 2024

Siblings at Odds Over Validity of Mother’s New Will

Family Law

March 20, 2024

Property Distribution During Divorce in Alberta