When two or more individuals acquire an interest in Ontario real property, they must decide how they will hold title. Although this determination is often made quickly at the time of purchase, the legal and estate consequences can be significant. The two primary forms of co-ownership are joint tenancy and tenancy in common, each carrying distinct rights and responsibilities that should be considered within the broader context of family, tax, and estate planning.
Joint Tenancy
Under a joint tenancy, all owners hold an undivided, equal interest in the entire property. The most notable characteristic is the right of survivorship: upon the death of a joint tenant, their interest extinguishes and automatically vests in the surviving joint tenant(s). The deceased’s interest does not form part of their estate and cannot pass under their will.
Joint tenancy is most frequently used between spouses or long-term partners. The right of survivorship can streamline the transfer of title on death and may reduce Estate Administration Tax (EAT), as the deceased’s interest does not require probate. However, the probate-avoidance benefit should be considered in light of the owner’s broader estate planning goals; for example, survivorship may unintentionally override the provisions of a will.
Joint tenancy also has implications in family law. For married spouses, a jointly held matrimonial home has special treatment under the Family Law Act, and the right of survivorship can affect equalization claims. Additionally, although each joint tenant technically owns an equal interest, joint tenancy may not reflect the parties’ relative financial contributions unless written agreements are in place.
Tenancy in Common
A tenancy in common offers more flexibility. Co-owners may hold unequal shares, which may be fixed by percentage or by reference to capital contributions. Although each tenant in common maintains a separate, identifiable interest, all have an equal right to possess and use the entire property.
Unlike joint tenancy, there is no right of survivorship. On death, an owner’s interest becomes part of their estate and passes under their will or the laws of intestacy. This ensures that an owner retains testamentary control over their share, though probate fees may apply.
Tenancy in common is often appropriate where:
- purchasers contribute unequal amounts;
- co-owners are not spouses or are involved primarily for investment purposes; or
- an owner wishes to bequeath their interest to someone other than the co-owner(s).
Because co-owners may have divergent interests and time horizons, it is often advisable to supplement a tenancy-in-common structure with a co-ownership agreement to address issues such as cost-sharing, occupancy rights, mortgage responsibilities, and dispute-resolution mechanisms. Without such an agreement, disagreements may lead to applications under the Partition Act, in which a court may order a sale of the property.
Changing the Form of Ownership
A joint tenancy may be severed and converted into a tenancy in common in several ways, including:
- Mutual agreement among co-owners;
- Unilateral severance by one co-owner (often effected by transferring their interest, including to themselves, and registering the transfer on title); or
- Course of dealing, where the parties’ conduct demonstrates an intention to treat their interests separately.
Severance may have consequences for tax and estate planning and should not be undertaken without legal advice. Converting from a tenancy in common to a joint tenancy typically requires all co-owners to consent.
It is also important to note that the registration of title does not always definitively govern beneficial ownership. For example, where property is held in joint tenancy, a resulting trust analysis may be required to determine the true beneficial owner, particularly in the context of gratuitous transfers between parents and adult children (as addressed in Pecore v. Pecore).
Choosing the Right Structure
The appropriate form of co-ownership depends on the parties’ personal, financial, and estate objectives. Joint tenancy can simplify succession, but it restricts testamentary control. Tenancy in common allows flexibility and control over who inherits a share but may introduce administrative complexity.
Prospective buyers should consider:
- desired beneficiary of each owner’s interest;
- relative financial contributions;
- probate and estate planning strategy;
- family law considerations;
- the need for a co-ownership agreement; and
- anticipated exit strategy or timeline.
These issues are best considered at the outset, but title can be re-structured later if circumstances change.
One size does not fit all when it comes to property ownership. In situations where property is co-owned, the owners must carefully consider all of their objectives and the legal implications before determining what structure is appropriate.
Whether you’re buying with a partner, family member, or friend, understanding your legal options is crucial. Our experienced real estate lawyers at Mills & Mills LLP can guide you through the nuances of joint tenancy and tenancy in common to ensure your interests are protected. Contact us to schedule a consultation and make informed decisions with confidence.
At Mills & Mills LLP, our lawyers regularly help clients with a wide range of legal matters including business law, real estate law, estate law, employment law, health law, and tax law. For over 140 years, we have earned a reputation amongst our peers and clients for quality of service and breadth of knowledge. Contact us online or at (416) 863-0125. The material provided through the Mills & Mills LLP website is for general information purposes only. It is not intended to provide legal advice or opinions of any kind.
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