When Family Financing Meets Property Law: Gifts, Loans & Limitation Periods

Why a Real Estate Lawyer in Toronto Matters

Helping children purchase a home is a generous act, but when those funds are advanced by a parent with the expectation of repayment, the legal complexities can be significant. If you have lent or gifted money to a child for a property purchase, engaging a real estate lawyer in Toronto is essential to protect your rights and ensure proper documentation is in place.

Gifts vs. Loans: Why the Label Matters

One of the first considerations a real estate lawyer will address is whether the funds provided are a gift or a loan. The distinction is important: a gift carries no obligation for repayment, while a loan has legal repayment terms. If the funds are advanced without a written agreement, registered security, or signed acknowledgment, courts may later treat them as a gift rather than a loan.

Even if repayment is intended, failing to document the terms or register a mortgage can create legal uncertainty. An experienced real estate lawyer in Toronto can formalize the arrangement, often through a registered subsequent mortgage or, at minimum, a promissory note signed by the borrower. For elderly parents, holding the loan or mortgage as joint tenants can also preserve survivorship rights.

Securing the Advance: Why Registration Matters

When parents provide funds for a down payment or closing costs, securing those funds ensures they are protected. A real estate lawyer will typically recommend registering a mortgage on the property title, drafting a promissory note outlining repayment terms, and ensuring both the child and their spouse acknowledge the debt in writing. Proper legal protection helps prevent unintended consequences, such as a child’s spouse retaining ownership of the property without being obligated to repay the parents.

The Two-Year Limitation Period and Demand Loans

In Ontario, the Limitations Act, 2002 requires most civil claims to be initiated within two years from when the claim was discovered. This includes family loans for real estate purchases. If loan terms are unclear or no formal demand for repayment is made, a parent may lose the right to recover the money. A real estate lawyer often structures the agreement as a demand loan and monitors communications and repayments to protect the lender’s rights within the limitation period.

Family Law and the Matrimonial Home

When funds are used to purchase a matrimonial home or a property held jointly with a spouse, additional legal considerations arise. Loans can reduce a child’s net family property in the event of separation, whereas gifts may be considered part of matrimonial assets. A real estate lawyer in Toronto reviews title structure, ownership rights, and family law implications to ensure the advance is protected. They can also coordinate with family law professionals to align documentation with broader estate and matrimonial planning goals.

Tax and Income Considerations

Parents charging interest on family loans must declare that interest as income for tax purposes, but interest can sometimes be forgiven if properly documented. A real estate lawyer works alongside tax professionals to ensure the financial arrangement complies with Canada Revenue Agency rules and avoids unnecessary tax liabilities.

Protecting Your Family and Investment

Whether you are a parent advancing funds or a child receiving financial support, legal guidance is critical. A real estate lawyer in Toronto provides essential advice on structuring and documenting loans and gifts, securing funds through mortgages or promissory notes, addressing limitation period issues, managing family law considerations, and navigating tax and estate planning implications.

Engaging a skilled real estate lawyer helps families prevent disputes, preserve relationships, and ensure that financial support is handled securely and legally.