Section 9 of the Ontario Estates Administration Act (“EAA”) is often referred to as the “automatic vesting” provision, since it provides for the automatic vesting of real property in certain circumstances. Specifically, subsection 9(1) provides that real property that is not “disposed of, conveyed to, divided or distributed” among the persons beneficially entitled to such real property within 3 years of the date of death automatically vests in the beneficiaries without any conveyance by the personal representative, unless the personal representative registers a “caution” on title. If a caution is registered, then the real property will not automatically vest in the beneficiaries until 3 years from the date of registration of the caution, which can be renewed for additional 3-year periods.
It may be more appropriate to refer to section 9 as the “automatic-ish vesting” provision. This follows from section 10 of the EAA and related case law. Section 10 states that nothing in section 9 derogates from the rights of an executor, administrator with the will annexed, or trustee under a will. The application of sections 9 and 10 were considered by the Ontario Court of Appeal in 909403 Ontario Ltd. v. DiMichele, 2014 ONCA 261. In its reasons, the Court noted that section 9 was not intended to limit the powers given to an estate trustee in a will, but rather “to give estate trustees additional powers, but only to the extent that the additional powers do not conflict with the provisions of the will. The intention of the deceased, as expressed in his or her will, is always paramount…” (par. 98). The Court goes on to state that:
The paramountcy of the testator’s intention is confirmed in the jurisprudence. Where a will gives the estate trustee a power to sell property at such times and in such manner as the estate trustee sees fit, s. 9 of the Estates Administration Act will not limit the scope of that power by requiring that the property vest after a specific period of time: Proudfoot Estate, Re (1994), 3 E.T.R. (2d) 283 (Ont. Gen. Div.), at paras. 8 and 11-12, var’d on other grounds (1997), 19 E.T.R. (2d) 150 (Ont. C.A.)…(par. 100).
In the result, the Court held that section 9 did not apply, and automatic vesting did not occur, because the will at issue gave the executor the power to sell the property “at such time or times, in such manner and upon such terms as my Trustee in his discretion may decide upon” and also permitted the trustee to postpone the sale (par. 101).
It is important to note that the real property at issue in the DiMichele case formed part of the general residue. In the Re Proudfoot case cited above the real property at issue was specifically gifted, and the Court reached a different result. The Court specifically rejected “the proposition that, wherever there is an express or implied power to sell in a will, lands cannot vest in the beneficiaries pursuant to the now Estates Administration Act. I find one must have regard to the intention of the testator as expressed in the will” (par. 20). In the result the Court found that section 9 of the EAA did apply because the real property was specifically gifted and the power of sale in the will excluded any real property “hereinbefore specifically devised” (par. 8).
The upshot is that whenever there is a testacy, real property that is not administered within 3 years of the date of death will not automatically vest pursuant to section 9 of the EAA. Rather, it is necessary to review the terms of the will and ascertain the intention of the testator. If the will contains an express or implied power of sale and a power to postpone conversion, and if the real property is not specifically gifted but rather forms part of the general residue, the application of section 9 is ousted and automatic vesting will not occur.