When two or more people decide to buy a home together, they will be faced with the question of how their respective interest in the property will be reflected on the title.
Similarly, relationships where one party already owns a home and is considering whether to put the other person on title when they commence cohabitation may be faced with the same question.
It is important to understand the different property ownership structures and how they may affect the parties’ rights and potential consequences upon separation
Joint Tenancy vs Tenancy in Common
Joint tenancy differs from tenancy in common in that each joint tenant on title would have an undivided 100% interest in the entire property. It also means that neither joint tenant may sell their share without the other’s consent. A joint tenancy arrangement provides each owner with a right of survivorship in the property such that if one joint tenant dies, the surviving owner automatically acquires the entire property and becomes the sole owner.
In contrast, if parties register the property title as tenants in common, each person owns a specific “undivided share” of the property. For example, two owners could decide to each own 50% of the property or some other percentage that suits their respective situations. In this scenario, if one owner dies, their respective share of the property will pass on to their estate (as opposed to the surviving owner).
If title to a property is held in joint tenancy, there is a presumption that upon sale of the property or in the event of separation, the equity in the home will be divided equally between the joint tenants. Joint tenancy ignores (in the first instance at least) whether the parties contributed to the acquisition of the property in unequal shares or whether one party had sole ownership over the property prior to the joint tenancy taking place.
As such, it is imperative that parties who wish to either purchase a home together or transfer property title into joint tenancy obtain advice on the potential consequences of such steps to avoid unintended consequences.
In addition, it is important to note that if one party already owned the property and the parties agree that the title to that property should be registered in joint tenancy, there may be exemption issues to be addressed, pursuant to the Family Property Act (FPA), which governs married and common law couples. The FPA allows for certain categories of property to be excluded from division upon separation or divorce. In general, the categories of exempt property are:
1) property that was gifted from a third party;
2) property acquired by inheritance;
3) pre-marital or pre-common law owned assets;
4) an award or settlement for damages in tort; and
5) proceeds from an insurance policy other than property insurance.
If a party wishes to transfer title from their own name into joint tenancy, part of the exempt status will be lost. Exemption issues can be complex to navigate, and their resolution largely depends on the parties’ ability to trace their exemptions. It is highly recommended that parties obtain legal advice on these issues, ideally before any title/ownership changes are made.
While adding a spouse as a joint tenant may be an indication that the spouse has a right to an equal portion of the value of the property, non-married joint tenants who have not cohabitated continuously for a period of three years or more may still need to engage in an inquiry as to the reasonableness or fairness in that outcome, taking into account the specific circumstances of the parties, including the contribution to acquisition, preservation, or improvement of the property.
How Kirk Montoute Dawson LLP Can Help You Navigate Joint Tenancy
Decisions affecting property should be made carefully, considering the potential benefits and pitfalls of joint tenancy. If you plan on sharing a home as a couple, much of the confusion can be avoided with a cohabitation agreement or a pre-nuptial agreement. Consult with a Kirk Montoute Dawson LLP family lawyer for advice on joint tenancy when moving in with a new spouse, purchasing a property with family members or business partners, or on how to organize your estate plan.
Author: Sandra Hudson