A recent Ontario Superior Court decision offers important reminders about the risks of informal property arrangements and the misuse of powers of attorney in real estate transactions.
The recent decision in Harris v. Melo, 2025 ONSC 4152, serves as a cautionary tale for real estate practitioners about the dangers that can arise when property ownership arrangements are based on informal or vague understandings without any documentation. The case, decided by Justice M.D. Faieta on July 23, 2025, involved a property dispute that festered for over three decades before reaching the courts.
The Facts: A Property Deal Gone Sideways
In December 1989, Karen Harris and Joseph Melo, both around 25 years old and in a dating relationship, purchased an investment property in Toronto for $314,000. The property consisted of a commercial unit on the ground floor and a two-bedroom apartment above. Here’s where things get complicated: Harris admits she contributed no money to the purchase, yet took title as a 50% owner alongside Melo.
According to Melo, his original co-purchaser, Mario Ciniello, backed out at the last minute after losing his money “in a card game.” Needing someone to qualify for the mortgage, Melo claims he approached Harris solely to help him secure financing, with no intention of her becoming a true owner. Harris tells a different story, stating that Melo treated her as “a full participant in ‘our’ purchase” and never suggested she was merely a mortgage guarantor.
Melo and Harris’ relationship ended acrimoniously in early 1990. Harris moved to Vancouver in 1991, while Melo remained to manage the property. Crucially, Harris had granted Melo a power of attorney limited to the initial purchase and mortgage documentation. This power of attorney remained in effect until Harris revoked it in 2017.
The Legal Battle: Trust Claims and Limitation Periods
Fast-forward to 2023, when Harris sought partition and sale of the property, along with an accounting of rental income from September 2021 onward. Melo countered by claiming Harris held her 50% interest in trust for him, seeking a declaration of sole ownership.
The court had to grapple with several complex issues, but the most significant was whether Melo’s trust claim was statute-barred under the Real Property Limitations Act. Justice Faieta found that it was.
The court applied the discoverability rule from Browne v. Meunier, 2023 ONCA 223, which tolls the limitation period until the rights holder discovers or ought to have discovered the material facts. The evidence showed that as early as 1992, Harris had hired lawyers to negotiate resolution of the property ownership, including attempting to sell her interest to a third party named Marcelo. This conduct was “clearly inconsistent with the view that she held her interest in the Property for the benefit of the Respondent.”
By 1995, the court found, Melo was on notice that Harris claimed both legal and beneficial ownership of her 50% interest. With the ten-year limitation period running from that time, Melo’s 2024 cross-application was far too late.
The Resulting Trust Analysis
Even though the limitation period disposed of Melo’s claim, Justice Faieta addressed the underlying trust issue. Under established law from cases like Rascal Trucking Ltd. v. Nishi, 2013 SCC 33, a purchase money resulting trust arises when someone contributes to a purchase price but doesn’t take title. Since Harris contributed no money to the purchase, the presumption would normally be that she held her interest in trust for Melo.
However, the court found Harris’s “assumption of risk on the mortgages” and “limited involvement with the Property” insufficient to rebut this presumption. The analysis suggests that had the claim not been statute-barred, Melo might have succeeded on the merits.
Key Takeaways for Real Estate Practitioners
This case offers several important lessons for transactional lawyers:
Document Intent Clearly: The entire dispute could have been avoided with proper documentation of the parties’ intentions at the time of purchase. Whether Harris was truly a co-owner or merely a mortgage facilitator should have been explicitly addressed in the purchase documentation.
Limit Powers of Attorney: Harris’s broad power of attorney, initially intended only for the purchase transaction, remained in effect for nearly three decades. Melo used it to secure additional financing totaling far more than the original mortgage. Powers of attorney for real estate transactions should be narrowly drafted and time-limited.
Address Ownership Changes Promptly: When Harris first attempted to resolve the ownership issue in 1992, prompt legal action could have avoided the limitation period problems that ultimately defeated Melo’s claim. Had Melo asserted his claim in a more timely manner, he may have been able to avoid this costly judgment.
Consider Resulting Trust Implications: When one party provides all the purchase money but takes title jointly with a non-contributing party, practitioners should explicitly address whether a resulting trust is intended or whether the arrangement represents a gift.
The Outcome
The court ordered partition and sale of the property, with the parties directed to agree on sale terms or return to court for directions. Melo was also ordered to provide an accounting of rental income from September 2021, with half of the net income to be paid to Harris from his share of sale proceeds.
Harris v. Melo demonstrates how informal arrangements between parties in personal relationships can create decades of litigation risk. For real estate practitioners, the case underscores the importance of clear documentation, appropriate limitation of powers of attorney, and prompt action when ownership disputes arise. Sometimes the best legal advice is the simplest: put it in writing.
