Occupation Rent in Estate Litigation

Occupation Rent in Estate Litigation

A claim for occupation rent consists of a claim seeking an order that a party pay rent for occupying a property for a specific duration of time. There are several leading cases which establish the governing principles and legal test to establish and succeed on a claim for occupation rent.

In Dagarsho Holdings Ltd. v. Bluestone2004 CanLII 11271 and later in Bergmann v. McMahon2010 ONSC 993 where the court in each case identified that occupation rent is an equitable remedy.  In Dagarsho Holdings, the court held that occupation rent is a concept based on the presumption that the parties have agreed to the payment of reasonable compensation by one party for occupying a property.  That presumption can be rebutted by evidence that the parties shared the intention that no compensation is payable for the occupation in question. 

In Bergmann, Daley J. explained that the equitable remedy of occupation rent is related to and arises from circumstances where unjust enrichment is found.  The familiar test for unjust enrichment of an enrichment of one party at the corresponding deprivation of another for no juristic reason is also applicable to determine a claim for occupation rent.  Daley J. held that “the entitlement to occupation rent arises where those entitled to the property have been ousted.”  In other words, occupation rent may be ordered where the occupier is occupying the property at the expense of the ousted, with no justifiable reason to enjoy this benefit.

Occupation rent in the context of an estate litigation is a relatively common situation. When someone dies and dies owning property, it is often the situation where one of the executors and/or beneficiaries continue to reside at the property belonging to the deceased at the time of his death rent free to the detriment of the estate and the other beneficiaries.

Recently, the Ontario superior Court of Justice addressed the issue of occupation rent in the context of an estate litigation in the case of Lima v. Ventura (Estate of), 2020 ONSC 3278 (CanLII).

Here, the late Maria Eduarda de Oliviera Bernardo Ventura died on December 27, 2018.  Her daughters, Carmelinda Ventura De Jesus (“Linda’), Eduarda Ventura Lima (“Eddy”) and her son, Antonio Manuel Oliviera Lima (“Antonio”) were named jointly as estate trustees in her will.

The property municipally known as 1371 Ogden Avenue in Mississauga was owned by the late Mrs. Ventura, and is the one asset of significant value in the estate (the “house”).  Antonio and his family have been residing in the house since 2012.  Eddy and Linda brought an application on behalf of the estate to sell the house and sought an order via cross-motion inter alia that Antonio was liable to the Estate of Mrs. Ventura for occupation rent for the time Antonio and his family resided at the house after Mrs. Ventura’s death since 2012 to the date of the motion heard on May 27, 2020.

In deciding that the Estate was entitled to occupation rent from Antonio, the  court relied primarily on two cased involving estates and claims for occupation rent. The first was the case of Broos v. Broos2009 CanLII 68463. The facts in Broos were found to be “remarkably similar” to the facts of this case. In Broos the respondent was also a co-executor who was occupying a property owned by the estate, and wished to purchase that property.  Low J. found that a wish to purchase the property does not justify the continued occupation of the property without paying proper compensation. 

In Broos, the respondent’s continued occupation denied the estate the opportunity to rent the property out for income.  The benefit to the occupier from his continued occupation was to the detriment of the other beneficiaries.  In this respect, the occupier stood in a conflict of interest with the other beneficiaries.

The Court in Lima similarly found that   Antonio’s continued occupation of the house on Ogden Avenue resulted in a conflict of interest where Antonio received the benefit of occupying the house to the detriment of the beneficiaries. The Court found that the conflict of interest of Antonio was difficult to reconcile with his duties of fidelity that Antonio owed to the estate and the other beneficiaries as an estate trustee to have the house sold at the best price.

The Court ultimately determined that fair market rent for the house would be in the neighborhood of $3,000 a month and found that it is only fair to the estate that Antonio pay two thirds of that amount each month for rent, and ordered that Antonio pay occupation rent of $2,000 per month to the estate and found that Antonio was liable for occupation rent commencing June 1, 2020.

The rationale the Court applied in Lima should be considered by anyone who intends to occupy a property owned by an estate, especially if said individual is an executor. Parties should be encouraged to negotiate and agree to terms and conditions of a beneficiary’s and/or executor’s occupation of an estate property until it is sold. For example, the beneficiary/executor can pay minimal rent in exchange for maintaining the property to ensure its value does not deplete until the Certificate of Appointment is issued and the property can be sold.

Jonathan M. Friedman is the owner of Friedman Estate Litigation P.C. and practices in the areas of Estate Litigation and Real-Estate Litigation.

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