Mortgage Broker

CMB MAGAZINE cmba-achc.ca fall 2018 | 23 legalease In some instances the lender or the additional person will insist that the additional person not be a guarantor/ covenantor but rather be a co-borrower, a key distinction being that a co-borrower is registered as having an ownership interest in the property. is can, particularly if there is later a falling-out between the client and the additional person, create substantial legal issues for the client and the additional person as to the nature of the additional person's ownership interest: n Did the additional person sign the mortgage documentation gratuitously or was the person purchasing an interest in the property? n Were the parties intending that the additional person hold the registered interest for himself or herself, or was the interest to be held in trust for the client? n If the additional person was not meant to hold the registered interest for himself or herself, did the parties intend for the additional person to: l have a different interest in the property? l be compensated for losses or opportu- nities passed on, such as being unable to obtain a further mortgage to purchase their own property while the subject mortgage was outstanding? Courts resolve these issues largely by referring to assumptions provided in law and by examining all of the circumstances to determine, if possible, the joint intentions of the parties. e problem is that: n the assumptions can sometimes result in outcomes the parties did not expect and n parties sometimes sincerely differ as to intentions/recollections or, particularly aer a falling-out, later lie about what their intentions were at the time of the transfer. e disputes can result in lengthy, expensive and stressful court actions to resolve the issues. easy solution A mortgage broker can provide valuable service to the client by recommending that the parties' intentions and expectations, including as to the above questions, be documented at the time of the transaction. e recommendation need not carry with it an obligation for the mortgage broker to prepare the document. In fact, it would be prudent for the parties to have a lawyer prepare the document. Had the intentions of the parties been documented at the time of the transaction, the issue in the following illustrative case would not have arisen. Failing to address the intentions appropriately and in a timely manner does not necessarily avoid the possibly uncomfortable discussion; it postpones it. It allows the discomfort to grow and for circumstances to change such that a party may come to have motivations to falsely describe their intentions and expectations in having entered into the arrangement. It very much increases the risk the parties will later have to spend great amounts of time and money to litigate the matter. illustrative case e B.C. Supreme Court case Jafar- Gholizadeh v. Larijani, 2018 BCSC 279 illustrates how messy things can get when a relative helps a person qualify for a mortgage and the parties later have a falling-out. Of note is that the court, in the absence of a written document setting out the intentions and expectations of the parties at the time of the transaction, was le to si through lengthy conflicting evidence to determine them. From the volume and the nature of the evidence, it would appear the case was expensive for both parties. What haPPened? e case involves a mother as the borrower and her 36-year-old daughter (the daughter) as the additional borrower. e mother had two other children (aged 33 and 26), neither of whom was directly involved in the transaction. e daughter had previously loaned her parents $10,000 for use toward the purchase of a condominium. at loan was repaid within a year and a half. Upon the parents' divorce, the children remained with the mother. e mother purchased the family's hookah shop from her husband; the daughter and one of the other children assisted with the operation of the shop from time to time. Aer the divorce, the mother located a home to purchase. Her "subject to financing" offer was accepted and she made the deposit. Her broker advised her that her income was insufficient to qualify her for a mortgage without an appropriate co-borrower. e purchase was ultimately completed, with the daughter signing the mortgage as a co-borrower and being registered on title as a joint tenant (note: a joint tenant has survivorship rights over the interest of the other person and so the daughter potentially could have owned the entire property to the exclusion of her siblings). e daughter loaned the mother a further amount of approximately $23,000 to pay out the father regarding the divorce settlement. e mother resided at the home continuously. e daughter resided in the home for a couple of years but then become estranged, aer which she had very little communication with her mother. e daughter began sending her mother vitriolic and hateful emails containing serious accusations. e emails, in part, demanded repayment of the balance owing under the $23,000 loan; the mother quickly paid it back, plus interest. During the period of estrangement, the mortgage came up for renewal. Because of the conflict between them, the mother tried to sign the renewal documents without the daughter's involvement and signature. Not surprisingly, the lender rejected those documents as being incomplete. Wanting to avoid another round of vitriolic emails from the daughter, the mother signed the Having no documentation confirming the intentions and expectation of the parties, the court decided the case on the basis of which party was more believable.

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