Buying Property Held in Trust for Someone Else in Ontario: Risks to Know

You have found a property you want, and then you learn that the name on title is not the person who is really selling. The seller says they hold the home as a bare trustee or nominee for someone else. That can be perfectly legitimate, but it changes who you need to deal with and what you need to check.

This article explains in plain words what a bare trust is, where the risks tend to sit, which consents can matter, and how a real estate lawyer usually verifies ownership. Every deal is different, so treat this as background and not as advice on your own purchase.

What it means when the seller is a bare trustee

CRA describes a bare trust as one where the trustee is essentially an agent for the beneficiaries. In plain terms, the name on title belongs to one person, but another person is the real owner for most practical purposes.

People set these arrangements up for different reasons. A parent may be on title so a child can obtain a mortgage, or relatives may hold a home together. Whatever the reason, the person signing your agreement may not be the person with the final say.

Owning property together as joint tenants or tenants in common does not by itself create a partnership, even if the owners share profits from the property. Whether a trust arrangement behind the seller has any other legal effect depends on the paperwork, so it is worth having a lawyer read it.

The main risks for a buyer

• Authority: the registered owner may not be allowed to sell without the beneficiary agreeing. What the arrangement permits depends on the trust or nominee agreement, which is a private contract.
• Competing claims: a beneficiary who believes they own the home may dispute the sale or the price.
• More than one owner behind the scenes: where there are several people with an interest, any one of them may be able to ask a court for partition or sale of the land.
• Tax and creditor issues: the Minister may certify unpaid tax as a debt and register the certificate in the Federal Court, where it has the same effect as a judgment, and a memorial may then be recorded in a provincial land registry to create a charge or lien on the debtor's property. That charge ranks behind any charge, lien or interest perfected before the memorial was recorded.

Not every one of these risks will apply to your purchase. The point is that a bare trust adds questions that a straightforward sale by the registered owner does not.

Consents that may be needed

Which consents are required depends on the facts. Three come up often.

• The beneficiary: whether the trustee needs the beneficiary's written approval depends on the trust agreement, so you should see that document or a reliable confirmation of its terms.
• A spouse: no spouse may dispose of or encumber an interest in a matrimonial home unless the other spouse joins in or consents, or another listed exception applies. How this applies to a bare-trust property depends on the facts, so a lawyer can confirm it.
• Co-owners and trustees: land granted to two or more people is treated as held by tenants in common unless the document clearly shows joint tenancy. That presumption does not apply to executors or trustees. Who has to sign therefore depends on how title is actually held.

How a lawyer verifies who really owns the property

The checks are usually practical and document-based. A lawyer will generally search title, ask for the trust or nominee agreement, and confirm who the beneficiaries are and whether they approve the sale. They will also look for registered charges, including any tax liens, and check whether any spouse needs to consent.

The closing itself is lawyer-driven. In Ontario's electronic land registration system, only a lawyer may sign for completeness of a document that requires compliance with law statements, and most transfers of title contain such statements. Generally, a transfer must be signed for completeness by two different lawyers, one for the transferor and one for the transferee. Some transfers, such as those within a family or between related parties, may be completed by one lawyer acting for both sides under the Law Society's professional standards. Since bare trusts are often family arrangements, ask early which approach applies.

Also ask about tax reporting. Bare trusts do not have to file a T3 return or Schedule 15 for taxation years ending on or after December 31, 2024 and before December 31, 2026, but reportable bare trusts may have to file for years ending on or after December 31, 2026. Some arrangements are excluded from the definition, such as related persons holding a property that is their principal residence. A tax adviser can confirm how this applies to the seller.

What to do next

• Ask your agent to have the seller disclose the trust or nominee arrangement in writing before you finalize terms.
• Have a real estate lawyer review the agreement of purchase and sale before you sign, or as soon as you learn about the trust.
• Request the trust or nominee agreement and the identity of every beneficiary.
• Confirm whether any spouse needs to consent.
• Ask for a title search to check for liens and charges.
• Do not close until the lawyer is satisfied about who has authority to sell.

If the seller cannot or will not complete the closing, a buyer who sues to enforce the deal can use a certificate of pending litigation, which is not notice to outsiders until the court issues it and it is registered on title. A court may discharge it in several cases, including where the party claims money instead of the land. A lawyer can explain whether that route is realistic.

Frequently asked questions