One of the ways owners can hold the title to a property in co-ownership is known as Joint Tenancy. In Joint tenancies the distinctive features include what is known as the ‘right of survivorship’ and the equal share in the property by each joint tenant. The right of survivorship holds that in the case of the death of one joint tenant the property his or her share will be transferred to the surviving joint tenant(s). Additionally, in Joint tenancies each owner is presumed and held to own an equal share in the property. That is to say that where there are 2 joint tenants, each tenant owns 50%, and if there are more such as 4 then each tenant owns 25%.
That being said, due to the right of survivorship there are various estate planning benefits in holding a property in Joint Tenancy, especially between spouses. However, there are also situations where a co owner to the property may wish to sever the joint tenancy and hold an undivided interest which can be left via a testamentary will to beneficiaries of his or her choosing. The process of converting Joint tenancies into a Tenancy in Common is known as severing of the Joint Tenancy.
There are typically three methods recognized by the law in order to sever a Joint Tenancy;
- By a person acting on his or her own share; this occurs when a Joint Tenant transfers his or her own interest to themselves as a tenant in common;
- By mutual agreement; this is self explanatory, this occurs when all joint tenants mutually agree to sever
- By a course of dealing; this method is perhaps the most complicated to deduce, but in essence is based upon actions taken by the joint tenants which imply an intention and/or mutual agreement to sever the joint Tenancy.
Course of Dealing;
The Ontario Court of Appeal has identified the following characteristics of a ‘course of dealing’ which may give rise to the severing of a Joint Tenancy;
- severance by course of dealing does not need evidence of an explicit or express intention to sever; A mutual intention can be inferred from the conduct of the parties and does not require evidence of agreement;
- severance by course of dealing however does require mutual knowledge by both Joint tenants that the other has severed and that the Joint Tenants treated their interests in the property as no longer being those of Joint Tenancy; this may be inferred or implied from communications and/or conduct;
- the determination of severance is an intrinsically fact-specific assessment; and
- the objective of severance by course of dealing is to ensure that a tenant does not unfairly obtain the benefit of the right of survivorship where the parties have shown a common intention to no longer treat their interests in the property as an indivisible, unified whole.
The courts when examining communications and/or conduct which may qualify as a ‘course of dealing’ which severs Joint Tenancy tend to consider whether;
- one party has vacated the property;
- there has been an expression of intention to negotiate a division or severance of property, including the subject property;
- there has been an intention to appraise the property with negotiation as its aim;
- there has been a requirement rendered by one party that other party buy their interest as a condition of continuing residence in the property;
- there has been an expression of an intent to initiate litigation for the division of property if no resolution reached through negotiation;
- there has been a newly drafted testamentary Will which disposes of the party’s interest in the property contrary to the Joint Tenancy; and
there has been an opening of Separate bank Accounts and a closing of joint bank accounts.
For more information please contact one of our experienced Real Estate Lawyers at MEHDI AU LLP.
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