Jointly-Owned Property Sparks Estate Lawsuits: Will You Be a Victim?

Do you own real estate with someone as joint tenants? There is a danger you need to know about. You can be pushed into costly lawsuits as the surviving owner and lose your ownership rights.

One benefit of joint tenancy is that it gives the last surviving joint owner survivorship rights. So the surviving owner will, ideally, inherit the jointly-owned property. However, as I will explain, the surviving owner’s right to inherit is not always guaranteed in court.

The recent 2012 Ontario Court of Appeal decision in Hansen Estate v. Hansen shows how a court can terminate a joint tenancy. Terminating a joint tenancy can lead to significant loss of wealth.

Hansen clarifies the legal principles a court can use to sever the joint tenancy. This means the last surviving joint owner loses his or her right to inherit. This can happen if the court declares your joint tenancy was “severed.” A severance converts the property from joint ownership to tenants in common.

How to Sever a Joint Tenancy

The court said a joint tenancy can be severed in Ontario in any of these three ways:

 Rule 1: You deal with your share of the property. You can sell, mortgage or conveyance it to yourself;

 Rule 2: You agree with the co-owner to treat the joint tenancy as terminated; and

 Rule 3: You and the joint owner, through a course of dealings, mutually treat the property as a tenancy in common.

 Rule 2 This does not allow a joint owner to terminate survivorship rights without the other owner’s knowledge or consent. This often happens when parties separate. A married or common-law partner can, by themselves, terminate the other partner’s rights. The act of registering a deed to yourself converts the property to tenants in common.

How Severance Works: An Example

I regularly help clients with this type of problem.

Jack and Mary are common-law partners. They contributed equally to buy a condominium 25 years ago. They are not married, but they promised each other that the last one of them to survive will inherit the property.

Jack sadly is dying from cancer. He has a son, Ian, from his first marriage. Using his father’s power of attorney, Ian has a lawyer register a new deed. This changes the ownership to the condominium from joint tenants to tenants in common.

•  Mary does not need to sign the new deed.
•  Ian does not have to tell Mary what he is doing.
•  Ian does not need Mary’s consent.

When Ian signs the deed to transfer the property to him, he has terminated the joint ownership and denies Mary any survivorship rights.

Now Jack and Mary own the property as tenants in common. Jack can make a will leaving his half of the house to Ian. This means Mary will not inherit it.

What happens when Jack dies?

Jack’s son, Ian, tells Mary he inherited Jack’s half interest in the property. Mary did not inherit Jack’s interest in the property. She had lost her rights of survivorship.

When a Joint Owner Breaks a Promise

Can a court enforce Jack’s original promise to leave Mary the condo? The promise is not in writing. Mary must start legal proceedings to protect herself.

Ian now demands that Mary sell the condominium. Mary refuses. Ian tells Mary to pay rent on his father’s half of the property. Mary is in shock that Jack could do this without her knowledge or consent. She never knew she was in danger.

 Domestic Contracts Offer Protection

Jack and Mary could have entered into a domestic contract. Since they were not married, this would be a cohabitation agreement.

 What if Mary and Jack Were Married?

Mary would have more rights to share in Jack’s property as a married spouse. However, Jack could still affect the severance of the joint tenancy.

Jack could still act alone to mortgage or sever the property without Mary’s knowledge or consent.

In the next post, I’ll cover more examples on how to sever a joint tenancy.

If you have a problem with jointly owned property, contact me now by calling 1.877.679.4557 (toll free).

You can read some of my other posts about joint tenancy dangers:

• Joint Tenancy v Tenants in Common – What’s the Difference?
• “Joint and Several” True Meaning Revealed
• How Joint Liability Creates Estate Problems

About Edward Olkovich

Edward Olkovich (BA, LLB, TEP, C.S.) is a nationally recognized author and estate expert. He is a Toronto estate lawyer and Certified Specialist in Estates and Trusts. Edward has practiced law since 1978 and is the author of seven books. Visit his website, mrwills.com, for more free valuable information.

2012 © MrWills.com. This information is not financial, legal, tax advice or a substitute for professional advice. Always consult with a professional before taking any action.