In Canada’s current high-interest rate environment, some homeowners may be required to sell a property. Real estate transactions can be complicated in basic circumstances, but this process could become even more complicated if a property is owned by joint tenants. A recent case before the Ontario Superior Court of Justice demonstrates the problems that could occur when one joint tenant wants to sell a property and the other does not.
A joint tenancy is a form of property ownership where two or more individuals share equal and undivided property ownership. The critical feature of joint tenancy in Ontario is the right of survivorship. If one co-owner passes away, their share automatically transfers to the surviving co-owners without going through the deceased person’s estate. All co-owners have equal ownership and decision-making rights in the property. They also share financial responsibilities equally, such as property taxes and maintenance costs.
A joint tenant can, however, request a partition and sale if they wish to sever the joint tenancy and no longer want to co-own the property with the other joint tenant(s). This ability is provided for in the Partition Act and the Rules of Civil Procedure, and an application under this legislation was the subject of the case mentioned above.
The case of Weise v. Weise involved the respondent and her husband, the applicant’s brother. The respondent and her husband intended to purchase a property in Sault Ste. Marie together but could not qualify for a mortgage. They sought the applicant’s help, which she accepted, and entered an Agreement of Purchase and Sale with the respondent to purchase the property. The applicant and respondent were both registered on title as joint tenants, and they were also joint mortgagers.
The applicant also entered a separate trust agreement, making her a bare trustee. The respondent was the beneficial owner of the land. Per this trust agreement, the respondent was responsible for all land-related expenses, which included realty taxes, insurance, heat, utilities, mortgage payments, and maintenance repairs.
After living at the property for approximately ten years, the respondent and her husband separated, and he moved away from the property. Not long after, the bank began withdrawing payments from her account, alleging that the respondent was failing to make hers. The respondent made several requests to have her name removed from the title and mortgage or sell the property. The applicant never responded.
The applicant then brought the application under the Partition Act and the Rules of Civil Procedure to have the land sold.
The Court refused to grant the application on the grounds that the applicant did not have “all the rights, powers and obligations of a joint owner and/or that she has an interest in the Property by being named a joint owner and/or having agreed to be a joint mortgagee.” The judge relied on the fact that the applicant had agreed to be a bare trustee, which was supported by the evidence.
A bare trustee is a legal concept where a person or entity holds and manages assets or property on behalf of another party but lacks significant control or discretion over those assets. They have no authority to make decisions or act independently concerning the assets they hold. The bare trustee’s role is to safeguard and transfer the assets as instructed by the beneficial owner, who retains complete control and ownership rights. As noted by the judge, this is supported by the case law, such as in Paragon Development Corporation v. Sonka Properties Inc. and Trident Holdings Ltd. v. Danand Investments Ltd.
The judge also found that the trust agreement did not grant the applicant the power to seek to sell the partition and sale of the property. The terms of the agreement stipulated that the applicant “shall not, without the written consent of the respondent, convey or encumber her interest in the Property in any manner whatsoever.” In the judge’s words, the respondent had “complete control” of the property.
However, the judge found that the applicant was entitled to indemnification; the respondent is liable for the debts and obligations of the respondent. She is entitled to bring a claim against the respondent for costs incurred as part of her duties as a bare trustee.
This case demonstrates the effectiveness of legal planning in joint tenancy arrangements and how a trust agreement can prevent the partition of a property sale. If the respondent was a joint tenant and had not agreed to be a trustee, her application might have succeeded.
Buying and selling real estate is often one of the most significant financial transactions a person or company will make in their lifetime. Hiring a law firm with adequate experience, skills, and resources is important to ensure that you feel confident that your interests are protected and your transaction closes smoothly. This is especially true if you are purchasing property as a joint tenant.
At Bader Law, our trusted real estate lawyers represent individual and corporate parties in both residential and commercial real estate transactions in Mississauga and throughout the Greater Toronto Area. Whether you require assistance reviewing an Agreement of Purchase and Sale, are purchasing a new home, or require assistance with a refinance, our team will advise you on your options, help secure your interests, and work to protect your financial investments. To learn more about how we can ensure your real estate needs are met, contact us online or at (289) 652-9092.