Joint tenancy can be a convenient way to hold property, especially for couples or family members. However, it’s essential to understand the legal implications, including the process of severing a joint tenancy when necessary. Let’s delve into the intricacies of this law in Ontario.
What is Joint Tenancy?
Joint tenancy is a form of property ownership where two or more people hold equal shares of the property. One of the key features of joint tenancy is the right of survivorship. This means that if one owner passes away, their share automatically transfers to the surviving owner(s) rather than being passed on according to a will or intestacy laws.
Severing a Joint Tenancy
While joint tenancy can be advantageous in many situations, there are instances where one or more co-owners may wish to sever the joint tenancy. Severing a joint tenancy essentially converts it into a tenancy in common, where each owner has a distinct, separate share of the property.
In Ontario, there are several methods by which a joint tenancy can be severed:
1. Agreement:
All co-owners must agree to sever the joint tenancy. This can be done through a written agreement signed by all parties involved. It’s crucial to ensure that the agreement is clear and properly executed to avoid any disputes in the future.
2. Unilaterally by One Owner:
Under common law, a joint tenancy can be severed unilaterally by one of the co-owners. This can be achieved through various actions, such as selling or transferring their interest in the property, or executing a deed of severance.
This can be done as a transfer on title by one owner, without notice to the other owner.
3. Mutual Agreement or Course of Dealing:
Even if the co-owners haven’t expressly agreed to sever the joint tenancy, their conduct or course of dealing may imply a mutual intention to do so. For example, if one co-owner treats their share of the property as separate or if they agree to divide the property among themselves, it may be considered as severing the joint tenancy.
Implications of Severing a Joint Tenancy
Severing a joint tenancy can have significant legal and financial implications:
- Loss of Right of Survivorship: Once a joint tenancy is severed, the right of survivorship no longer applies. Upon the death of a co-owner, their share of the property will not automatically transfer to the surviving owner(s) but will be subject to their will or intestacy laws.
- Tax Considerations: Severing a joint tenancy may trigger tax consequences, such as capital gains tax, depending on the circumstances of the severance and the nature of the property.
- Potential Disputes: Disputes can arise between co-owners regarding the severance of a joint tenancy, particularly if there is disagreement or ambiguity regarding the intention to sever.
Estate Litigation Context
We have seen that couples will not discover the unilateral severance of a joint tenancy on their matrimonial home by a spouse prior to death.
If you are in a situation where a loved one has passed, and in trying to get your affairs in order you discover a change to the ownership of your home, contact us today.