A house, condo, farm or recreational property is likely to be the most valuable asset that many people own, especially in British Columbia with its inflated land values. If the property is owned by just one person, making decisions about what to do with it is relatively simple. However, frequently land ownership is shared creating the potential for disagreement and even conflict between co-owners.
The reasons for shared ownership of land are varied. Many married and common law couples buy a home to live in and naturally both are registered as owners on title of the property at the Land Title Office. Parents who help their children buy their first home by contributing funds for its purchase are often also added as co-owners. Parents also decide frequently to add one of more of their children to the title of their own home as an estate planning tool. Multiple family members may also over the course of time be added to the title of a farm or recreational property. And business partners who purchase land for development/investment purposes are typically all registered as owners.
Tenancy in Common VS Joint Tenancy
Land that has more than one owner is typically owned in one of two ways. Co-owners can be ‘tenants in common’ or ‘joint tenants’. The crucial difference between these types of land ownership concerns ‘survivorship’, that is what happens when one of the co-owners dies.
If co-owners are tenants in common of land, when one of the owners dies, their interest in the land forms part of their estate to be distributed in accordance with the deceased’s will, or in the absence of a will, the rules governing intestacies set out in the Wills, Estates, and Succession Act. Therefore the surviving co-owner of the land does not receive the deceased’s interest in the land (unless they are a beneficiary of the land under a will or a successor to the land on an intestacy).
However, if co-owners of land hold the land as joint tenants, when one of the co-owners dies, their interest in land automatically transfers to the surviving joint tenant(s). Consequently, the deceased’s interest in the land does not form part of their estate and is not distributed in accordance with any will they might have. Land is typically held in joint tenancy by married/common law couples and by parent(s) with an adult child because the parties have turned their minds to the issue of succession, that is who should own all of the property if one of the owners dies. However in other cases, all that might be intended is a desire to avoid the probate fees that are charged on the value of assets that pass through the estate. (If ownership of land passes to a joint tenant outside the estate, no probate fees are payable.)
Joint Tenancy Disputes
Problems in joint tenancy ownership can arise both when the parent is still alive and later after the parent has died and the parent’s legal interest in the land has passed to the surviving joint tenant. The first type of problem may occur in a situation where a parent who added a child to the title of property later decides that the child should be removed from the titile. Perhaps the child has fallen out of favour with the parent for some reason such as marrying someone against the parent’s wishes.
The second type of problem typically arises when the parent’s descendants are reviewing his or her estate after death. If one child receives the parent’s house through joint tenancy succession, other children who receive less under the parent’s will may regard that arrangement as inequitable.
In both of these situations, the issue to be addressed is what was the parent’s intention at the time of the initial transfer of a joint tenancy interest to the child. If the evidence is clear that the transfer was a gift (and the parent had the mental capacity to make a gift and was not unduly influenced), the transfer will be upheld. Therefore the parent, while he or she is still alive, cannot reverse the gift and force the child to retransfer their interest in the land back to the parent. Of course the parent can ask for the return of the gift and the child may agree; but the child cannot be compelled to return a gift.
The most a parent can do in this type of situation is to unilaterally ‘sever’ the joint tenancy. If the joint tenancy is severed, both parties will thereafter hold their interests in the land as tenants in common each holding what is called an ‘undivided 50% interest in the land’ and the survivor of the two owners of the land will not automatically receive the other’s interest when that person dies.
Often however it is unclear what a parent intended when they added a child to the title of their land as a joint tenant gratuitously (that is without any payment from the child). Was it a gift or did the parent have other reasons for wanting the child to be on title, for example avoiding probate fees on the value of the land?
In a case such as this, the law imposes on the parties a ‘rebuttable presumption’ that a gratuitous transfer of land was not intended as a gift and the person who received the transfer holds the land on a ‘resulting trust’ for the parent, or if the parent has died, for the parent’s estate. The practical effect of such a presumption is that it if the transferee’s right to the land is challenged, either by the parent while the parent is still alive, or by other family members after the parent has died, the transferee child will have to prove to the court on a balance of probabilities that the transfer was in fact a gift. If that child is not able to prove a gift, the child will be compelled by court order to transfer the land back to the parent or the parent’s estate.
If the disputed transfer goes to court, the judge hearing the dispute will consider all aspects of the matter including any documentation relating to the transfer, the parent’s circumstances including his or her finances, living arrangements and relationships with both the transferees and other family members, and in the case of a deceased parent, hearsay evidence of what the parent said about the transfer.
Find Out About Your Rights
Are you looking to establish a trust or need to go to court for estate matters? Don’t go it alone. In such a complex area of law, it helps to have a trusted lawyer by your side. Contact McLarty Wolf now to discuss your case. We’re happy to help answer your questions about joint tenancy disputes. Call 1-855-688-9542.