A COMPREHENSIVE LOOK AT THE ROLE OF DOWER IN REAL ESTATE TRANSACTIONS IN 2018

 

Created by Pranav Khemka, Barrister & Solicitor

 

TABLE OF CONTENTS

 

 

SECTION                                                                                                       PAGE NUMBER

Introduction                                                                                                     3      

The Test to Determine if Dower Applies                                                        3

Application of the Test to Determine if Dower Applies                                   3

What Happens When Dower Applies?                                                           7

Consequences to Breaching the Dower Act                                                  8

How Should Real Estate Agents Properly Address                                       9

Dower in Real Estate Transactions

Conclusion                                                                                                      10

Bibliography                                                                                                    11

 

Introduction

 

Imagine a scenario where a husband, who is the sole owner of a home, decides to sell his property to a third-party without informing his spouse. Come possession day, the seller informs their spouse of the hidden transaction and now, to the shock and dismay of the non-owner spouse, she is forced to leave her cherished home! Seems unfair, right?

 

Alberta’s Dower Act was introduced in 1917 to avoid these types of situations from arising. Specifically, the Dower Act provides legal protection to the non-owner spouse during the “disposition of a homestead”. A “homestead” often means the home/dwelling you are living in and, while there are various forms of “disposition”, the most common types of “disposition” that arise are the sale and mortgaging of a home.1 Without the consent of the non-owner spouse, a disposition cannot occur. The reason consent is required is because the Act recognizes that the non-owner spouse has an important life estate interest in the property.2 That is, even though the non-owner spouse isn’t registered on title, the Dower Act recognizes their right to live in the property for the rest of their life. Hence, the non-owner spouse plays a critical role in the disposition of land as they need to waive their life estate interest to allow the disposition to occur.

 

There has been a growing recognition within the real estate industry, by professionals and lay individuals, concerning dower rights since its introduction. As such, the Alberta Real Estate Association (“AREA”) has amended the standard real estate forms to ensure that dower is recognized and explained at the start of the REALTOR®-client relationship and dealt with, accordingly, at every stage throughout the real estate transaction.

 

This article aims to provide readers with an overview of dower and its role in real estate transactions in 2018.

 

The Test to Determine if Dower Applies

 

According to the Dower Act, there is a simple 3-pronged test to determine whether dower rights need to be considered during a disposition of land. To trigger dower, each of the following criteria must be satisfied:
 

  1. Title to the property must be in one person’s name;
  2. The registered owner must be legally married; and
  3. Either spouse or both spouses must have, at some point, resided on the property since the time of their marriage.3

Application of the Test to Determine if Dower Applies

Now that you know the legal test to determine whether dower applies, it’s important to apply that knowledge to determine whether dower applies in the following scenarios that most real estate professionals and their clients frequently come across. Please consider the following

 

Situation #1 – A Married Couple Resides on a Property

 

Situation:       George and Emma have been legally married since 2001. George is the sole registered owner of a property in Lethbridge that he bought before he even knew Emma. George and Emma have resided on the property since their marriage. George wants to sell the property and move his family to Calgary. Does Emma have dower rights in the property?

 

Answer:          Yes. Dower is triggered. All 3 elements of the test are satisfied. It doesn’t matter that George had purchased the property prior to his relationship with Emma. Once he married Emma and chose to reside on the property with his wife during the course of their marriage, Emma received a life estate interest in the property, which will now need to be waived to allow the sale of the home to occur.

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Situation #2 – Investment Property

 

Situation:       George and Emma have been legally married since 2001. George is the sole registered owner of a property in Lethbridge that he purchased after marrying Emma. The property is an investment property. As such, neither Emma nor George have resided on the property since their marriage. George wants to sell the property and utilize the income to purchase a better investment property. Does Emma have dower rights in the property?

 

Answer:          No. Dower is not triggered. It is a requirement of the Dower Act that either or both spouses must reside on the property at some point during their marriage. Since neither spouse lived on the property, dower does not apply.

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Situation #3 – Common Law Relationship

 

Situation:       George and Emma have been in a common law relationship since 2001. George is the sole registered owner of a property in Lethbridge. George and Emma have resided on the property since their common law relationship began. George wants to sell the property and move his family to Calgary. Does Emma have dower rights in the property?

 

Answer:          No. Dower is not triggered. In Alberta, a common law relationship is legally referred to as an adult interdependent relationship. When the Alberta Adult Interdependent Relationships Act was implemented, the Act clearly distinguished married couples from common law couples. As a result, the Act amended various pieces of legislation to afford common law spouses with similar rights to married couples. Unfortunately, the Dower Act was one of the pieces of legislation not to get changed. As such, dower only provides protection to a married non-owner spouse instead of a non-owner common law spouse.

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Situation #4 – Same-Sex Couples

Situation:       Ashley and Meghan are a same-sex couple who have been legally married since 2010. Ashley is the sole registered owner of a property in Lethbridge that she bought after marrying Meghan. Ashley and Meghan have resided on the property since their marriage. Ashley wants to sell the property and move her family to Calgary. Is dower triggered? Does Meghan have dower rights in the property?

Answer:          Yes. Dower is triggered. Following the 2004 landmark case Reference Re Same-Sex Marriage, the definition of marriage was judicially redefined to recognize same-sex marriages in an attempt to protect people’s rights under the Canadian Charter of Rights and Freedoms. As a consequence of the case, the federal Civil Marriage Act recognizes same-sex marriage as legal marriage. Since the three-pronged test has been satisfied, dower will apply. Meghan has dower rights in the property.

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Situation #5 – Separating and Divorced Couples

Situation:       George and Emma have been legally married since 2001. George is the sole registered owner of a property in Lethbridge. George and Emma have resided on the property since their marriage. Their relationship has fallen apart. George is divorcing Emma. They aren’t legally divorced yet but have separated. George wants to sell the property and move to Calgary. Does Emma have dower rights in the property?

 

Answer:          Yes. Dower is triggered. It does not matter that George and Emma have separated and are living separate and apart. George is still legally married to Emma until the divorce is finalized. As such, the Dower Act still provides Emma with a life estate interest in the property that must be waived to allow the sale of George’s land. Had the property remained with George after the divorce was finalized, he was no longer legally married to Emma and he then decided to sell the property then dower would not apply.

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Situation #6 – A Company Owns Property

Situation:       George and Emma have been legally married since 2001. George’s company 123456 Alberta Inc. is the registered owner of a property in Lethbridge. George is the sole shareholder and director of the company. George and Emma have resided on the property since their marriage. George wants to sell the property and move his family to Calgary. Does Emma have dower rights in the property?

Answer:          No. Dower is not triggered. Dower only applies when there is one person’s name on title. That person must be an individual and not a company.

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                         Situation #7 – Renting

 

Situation:       George and Emma have been legally married since 2001. George and Emma are renting the basement suite in a property in Lethbridge. Neither George nor Emma are the registered owners of the property. George’s name is the only name on the Landlord and Tenant Agreement. George and Emma have resided on the property since their marriage. George wants to transfer his lease to a third-party and move his family to Calgary. Does Emma have dower rights in the property?

 

Answer:          No. Dower is not triggered. It doesn’t matter that Emma’s name is not on the Landlord and Tenant Agreement. For dower to apply, George had to be the sole registered owner of the property and not a tenant. Interestingly, if George had a registered leasehold interest in the property and wanted to sell his interest to a third party then dower would apply. Emma would then need to consent to the transfer of the leasehold interest to the third party.

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Situation #8 – Joint Owners

Situation:       George and Emma have been legally married since 2001. George and Emma are joint registered owners of a property in Lethbridge. George and Emma have resided on the property since their marriage. George wants to sell the property and move his family to Calgary. Does Emma have dower rights in the property?

Answer:          No. Dower is not triggered. Since George and Emma are joint owners of the property, neither George nor Emma own the property individually. Together they own the property. As such, George and Emma must make unanimous joint decisions concerning the sale of their home. Dower does not apply in joint tenancy scenarios.

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Situation #9 – Joint Owners

Situation:       George and Phil are joint registered owners of a property in Lethbridge. George isn’t married but Phil has been married to Gracie for a very long time. Phil has resided on the property since his marriage to Gracie. George and Phil decide to sell the property and go their separate ways. Does Gracie have dower rights in the property?

Answer:          No. Dower is not triggered. It is irrelevant that Phil is married to Gracie. Remember, dower does not apply in joint tenancy scenarios even though one of the joint tenants is married to a third party. The first part of the dower test requires only one person to be registered on title.

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Situation #10 – Spouse Can’t Be Located

Situation:       George and Emma have been legally married since 2001. George is the sole registered owner of a property in Lethbridge. George and Emma have resided on the property since their marriage. Their relationship has fallen apart. George and Emma aren’t legally divorced yet but have been separated since 2003. The last George heard, Emma moved to Europe. He doesn’t know where and has no contact information for Emma. George wants to sell the property and move to Calgary. Does Emma have dower rights in the property?

Answer:          Yes. Dower is triggered. George will need Emma’s consent to dispose of the home. Since Emma cannot be located, George can make an application to the court to dispense of the consent requirement. It should be noted that it is difficult, but not impossible, to dispense the consent requirement due to the importance placed on preserving the non-owner spouse’s dower rights.

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Situation #11 – Transferring Title from Parent to Child

Situation:       George and Emma have been legally married since 2001. George is the sole registered owner of a property in Lethbridge. George and Emma have resided on the property since their marriage. George and Emma want to transfer ownership of their property to their daughter Julie. Does Emma have dower rights in the property?

Answer:          Yes. Dower is triggered. The transfer of ownership from the parent’s name to the daughter’s name is considered a disposition within the Dower Act. Since each element of the dower test has been satisfied, Emma needs to consent to allow the transfer of ownership to happen.

What Happens When Dower Applies?

When dower rights are triggered, the Dower Act states that the non-owner spouse must provide their consent to allow for the disposition of their home, unless the court has issued an order dispensing of the consent requirement.4

The consent must be in writing and signed/acknowledged apart from the registered spouse. The reason consent is obtained apart from the registered spouse is due to concerns about duress, misrepresentation and/or undue influence. Remember, the consent must be free and voluntary to be valid.

The non-owner spouse’s written consent must state that they are:

  1. Aware of the nature of the disposition;
  2. Aware that they have a life estate in the homestead and that they have the right to disagree with the disposition;
  3. Consenting to the disposition for the purpose of giving up their life estate and other dower rights, to the necessary extent to give effect to the disposition, in the homestead; and
  4. Freely and voluntarily signing the consent form without being forced to do so by the registered spouse.5

It’s important to note that consent is given numerous times throughout a real estate transaction. Consent is not given only once; consent is given at the time of listing the property, at the time a purchase contract is accepted or a counter offer is made and at the time the Transfer of Land is being signed at the lawyer or notary’s office. The reason for the repeated consent is simple – dower rights entitle the non-owner spouse to make decisions, at each step of the transaction, when their home is being sold. Without their consent the transaction cannot proceed.

Alternatively, the non-owner spouse has the option of releasing all their dower rights and their life estate interest in a specific property by registering a Release at Land Titles Alberta.6 The Release needs to be signed only once by the non-owner spouse and it remains in effect until the document is removed from title. The need for repeated consent is circumvented since the non-owner spouse has waived all their rights concerning the property. The land is no longer considered a homestead and the spouse of the married person ceases to have any dower rights in the land.7 However, it’s important to note that the Release can be waived at any time by the non-owner spouse and removed from title.  

Consequences to Breaching the Dower Act

The Spouse

If dower requirements aren’t satisfied and a married spouse disposes of their home without the written consent of the non-owner spouse or they fail to obtain a court order dispensing of the consent requirement then the registered spouse will be held guilty and can be required to pay damages to their non-owner spouse in an amount equal to ½ of the value that the home sold for.8 Alternatively, they can also be required to pay a $1,000.00 fine or be imprisoned for a maximum of 2 years.9

In Joncas v. Joncas, the husband and wife were undergoing a divorce. Before the divorce was finalized, the husband chose to sell the matrimonial home without obtaining his wife’s consent – in accordance with the requirements within the Dower Act. His house sold for $325,000.00. After paying off the mortgage ($199,599.00), capital gains tax ($33,320.30) and any closing costs, the husband was left with $87,698.70.

Since Mr. Joncas sold the matrimonial home without his wife’s consent, the Court relied on section 11 of the Dower Act and held that the wife was entitled to $162,500.00 in damages, which was half of the sale price of the home. Even though the husband only made $87,698.70 (after paying all expenses) from the sale of his home, he ended up paying $162,500.00 to his wife.10

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The Real Estate Professional

Liability for failing to appreciate the requirements of dower by failing to ensure the standard real estate documents are properly executed can also extend to real estate professionals. In Chand et. al. v. Sabo Bros. Realty Ltd. et.al., the Court held the seller’s real estate agent was liable for failing to obtain a wife’s consent to waive her dower rights. In Chand, the matrimonial property was in the husband’s name. The listing agreement was signed by both spouses. As such, the real estate agents incorrectly assumed the sale property was jointly owned.

When issues arose between the vendor spouses during the course of the transaction, the purchase contract fell through. Though the purchasers settled their claim against the Home selling guide, they also made a claim against the real estate agents. They argued that the agents owed a duty of care to the purchasers as they held themselves out as professionals. The agents were liable for the damages incurred by the purchasers. This included their legal fees, the value of the land lost and the loss of a favorable interest rate for a mortgage.11

How Should Real Estate Agents Properly Address Dower in Real Estate Transactions

Dower rights should not be treated as an afterthought within a real estate transaction. They must be addressed at the onset of the REALTOR®-client relationship and every time thereafter. For this reason, AREA has incorporated dower within their standard forms in a manner that meets the requirements specified within the Dower Act.

Stage #1 – The Exclusive Seller Representation Agreement and its Dower Consent

When there is interest from a vendor to retain a real estate professional to assist in the sale of their home, the agent, generally, gets their seller(s) to sign the Exclusive Seller Representation Agreement. The Exclusive Seller Representation Agreement discusses various aspects of the REALTOR®-client relationship, such as each parties’ roles and responsibilities and the agent’s fee structure.

If it is found that dower applies after examining title to the property and answering the questions posed in clause 8.1 of the Exclusive Seller Representation Agreement, then the real estate professional should, firstly, ensure the non-owner spouse cosigns the Agreement. However, cosigning the agreement, in itself, doesn’t mean that the requirements posed in the Dower Act have been satisfied. As such, the agent should ensure that the non-owner spouse signs the Exclusive Seller Representation Agreement Dower Consent and Acknowledgement form before a Commissioner for Oaths and that the form is attached to the Exclusive Seller Representation Agreement.

Until the Dower Consent and the Representation Agreement are signed by the non-owner spouse, it is recommended that the real estate agent be careful not to expend too much money on promotional items or materials used to market the property incase issues regarding consent arise, once the non-owner spouse is informed about their rights, and the non-owner spouse refuses to sign.

Stage #2 – The Purchase Contract and its Dower Consent

When an offer is accepted or a counter offer is made, the non-owner spouse will be required to provide their consent. The non-owner spouse’s name must be specified within the Purchase Contract, as a co-seller. Everywhere the registered spouse signs and initials – so will the non-owner spouse. Likewise, the non-owner spouse will be required to sign the Purchase Contract Dower Consent and Acknowledgment form. Note, the Purchase Contract Dower Consent and Acknowledgement form must be signed before a Commissioner for Oaths, it must be attached to the Purchase Contract and the form must be delivered to the buyer(s) by a certain date, as defined within clause 7.1 of the Purchase Contract.

Remember, the Purchase Contract Dower Consent and Acknowledgment form is different from the Exclusive Seller Representation Agreement Dower Consent and Acknowledgment form. As such, you can’t reuse the earlier consent form. A new consent will be needed. If a new consent cannot be provided by the deadline date, as specified in clause 7.1 of the Purchase Contract, then the Purchase Contract becomes voidable and the seller’s legal position is jeopardized. That means, the buyer has the option to render the contract null and void by providing the seller with written notice. Likewise, if dower applies real estate professionals should ensure that clause 7.1 is filled out within the Purchase Contract with a mutually agreeable delivery deadline date. You cannot ignore filling out clause 7.1 of the Purchase Contract, if dower applies.

Conclusion

Dower plays a critical role in a real estate transaction. It is extremely important that the requirements within the Dower Act are acknowledged early on in the transaction and that they are appropriately satisfied – otherwise the consequences can be extreme for both the seller and/or their agent.

If you have any questions concerning dower, please don’t hesitate to contact Khemka Law or counsel of your choosing. We are always here to assist you. Thank you for your time and consideration.

Sincerely,

Pranav Khemka

Pranav Khemka, Barrister & Solicitor

T: (403) 457-9577 | F: (403) 457-9578 | E: pkhemka@khemkalaw.com

 

Bibliography

 

  1. Section 1 of the Dower Act, RSA 2000, c D-15;
  2. Ibid;
  3. Section 2 of the Dower Act, RSA 2000, c D-15;
  4. Ibid;
  5. Section 5 of the Dower Act, RSA 2000, c D-15;
  6. Section 7 of the Dower Act, RSA 2000, c D-15;
  7. Ibid;
  8. Section 11 of the Dower Act, RSA 2000, c D-15;
  9. Section 2 of the Dower Act, RSA 2000, c D-15;
  10. Joncas v. Joncas (2017), ABCA 50 (CanLII)
  11. Chand et. al. v. Sabo Bros. Realty Ltd. et. al. (1979), 2 WWR 248