Occupation rent and estate litigation

“Randy submits that the elements of unjust enrichment are present in this case, entitling the estate to occupation rent for the period following Henry’s death. Randy argues that Gary had the benefit of rent-free occupation for Henry’s residence from February 2016 to January 2020. The estate suffered a corresponding deprivation, since it was deprived of market rent that it could have otherwise enjoyed for that period. Gary was not entitled to that estate asset under Henry’s will, nor was there any other juristic reason for Gary’s enrichment. In these circumstances, the estate is entitled to occupation rent equal to the market rent that could have been realized for that period, according to Randy.”¹

This excerpt from the Calmusky case is the middle of the story.  Let’s start at the beginning by reviewing the law.

In estate litigation this scenario comes up quite often.  One family member stays in mom and dad’s house after their death and appears to be freeloading at the expense of the others. This can happen in estate litigation when a deceased person fails to adequately document their intentions with respect to the ongoing occupation of their home after their passing. The occupying party is often a child, a common law spouse or a second spouse of the deceased who is not on title to the property and who may or may not have an interest in the home. The occupying party will often point to an undocumented arrangement which permits their ongoing occupation of the deceased’s residence without payment. If requests to leave are ignored by the occupying party, and litigation subsequently commences, whoever holds a beneficial interest in the home may have to wait months or even years for the matter to be resolved and may be unable to either sell or rent out the home during this time.

Occupation rent is an equitable remedy, and equitable remedies are discretionary. As such, whether a court will order that occupation rent be payable will be determined on a case-by-case basis. The courts frequently employ the equitable doctrine of unjust enrichment to decide whether occupation rent should be payable by an occupying party.² Unjust enrichment is restitutionary at its core; the object of the remedy is to require the defendant to repay or reverse the unjustified enrichment.³ So where an occupying party has derived a benefit (such as not having to pay rent for a number of years), and a deceased’s estate has suffered a detriment (such as the loss of rental income during that time or the inability to sell the property), it is open to the court to find that, in the absence of any factors justifying the non-payment of rent, the occupying party must pay ‘occupation rent’ during some or all of the time following the death of the deceased.

The factors which may justify the non-payment of occupation rent will largely depend on the facts of each specific case. Where the occupying party can prove that the deceased intended for him/her to live rent-free at the property, this will be determinative. In the absence of such proof, the court will consider whether occupation rent should be paid based on several factors including the reasonable expectations of the parties, any relevant public policy concerns and the equities of the particular case.

In Calmusky v. Calmusky,⁴ the court heard that a son continued to reside at his father’s home for almost four years after the father passed. The son paid no rent to his father’s estate, but paid the property taxes and home insurance during that time. The son eventually purchased his father’s home. The court found that the son derived a benefit by occupying the property rent-free, and that the father’s estate had suffered a detriment by being denied the opportunity to rent the property to a third-party. However, the court did not order the son to pay occupation rent. The court reasoned that the parties to the dispute did not reasonably expect that occupation rent would be paid. The court also pointed to the fact that the son was entitled to a 50% interest in the property (through his father’s will), that the son had indicated an intention to purchase the property early in the litigation and that the home had appreciated in value during the four years after the father’s death.

In Filippelli Estate, the deceased bequeathed her home to her two daughters, however the deceased’s son remained living in the home for ten months after her death, without paying any rent. The daughters were successful in seeking the son’s removal from the property and in seeking an order that he pay occupation rent in the amount of $2,000 per month for each of the ten months. The court rejected the son’s claim that he was a tenant (and thereby subject to the protections afforded by the Residential Tenancies Act) and specifically noted the “dangerous precedent” which would result if a son or daughter could simply assert that s/he was a tenant and that his/her deceased parent was the landlord and thereby thwart the testator’s intentions.⁵

Often, a court will be asked to order that an occupying party pay interim occupation rent to the estate while litigation is ongoing in respect of the deceased’s home. In Bergman v. Amis, the beneficiaries of the deceased’s estate (which included the deceased’s home) sought interim occupation rent from the deceased’s common law spouse while her claim for an interest in the home was being litigated. Using unjust enrichment principles, the court found that the common law spouse should pay occupation rent to the estate, to be set off against the monthly mortgage payments she was making for the property.

The oft cited general principle of occupation rent is that if a person is in occupation without a lease, although the relationship of landlord and tenant will not exist, the law will imply a contract for payment to the landlord or a reasonable amount for the use and occupation of his land.⁶ This principle is based upon the presumption that the deceased and the occupying party have agreed to reasonable compensation. That presumption can be rebutted by evidence that the parties intended that the occupation be without compensation.⁷  Where an occupying party cannot provide such evidence, he/she may need to look at one of the other defences to a claim for unjust enrichment – my blog on this topic may be of assistance.