Joint Tenancy vs. Tenancy In Common: Why It Matters During A Separation

The distinction between joint tenancy and tenancy in common is often addressed at the time of acquisition and rarely revisited. Property ownership between spouses or partners is not often given due consideration until the relationship breaks down.

Upon separation between owners, the legal characterization of title can become pivotal. The legal distinction between holding property as a joint tenant or a tenant in common can impact each parties respective interests upon separation, leading to further complications depending on how title is held.

The Legal Framework: Joint Tenancy or Tenancy in Common

In joint tenancy, co-owners hold an undivided interest in the whole of the property, subject to the right of survivorship. Upon the death of one joint tenant, their interest passes automatically to the surviving joint tenant(s), outside of the estate.

By contrast, a tenancy in common involves distinct, divisible interests. There is no right of survivorship, and each co-owner’s share forms part of their estate on death. Shares need not be equal and may reflect the parties’ respective contributions or intentions.

The key consideration for lawyers advising at the time of purchase as to how to take title is often in the context of the owners’ estate planning objectives.

The right of survivorship allows a jointly held property to pass outside the estate of a deceased owner. As a result, estate administration tax (generally, 1.5% on estate value exceeding $50,000) is avoided, and title transfers to the surviving owner by way of a survivorship application.

By contrast, a tenancy in common carries no right of survivorship. Each owner’s interest forms part of their estate on death and is distributed in accordance with their testamentary intentions. This structure affords greater control over the disposition of that interest, but does not provide the same estate administration efficiencies as joint tenancy and will often be subject to estate administration tax.

Separation

Separations significantly complicate ownership of real property. Upon separation, there exist two key considerations that must be addressed (1) the equalization of the Net Family Property; and (2) each owners testamentary objectives.

Owners must be cognizant of the fact that ownership may not automatically change upon separation. Lawyers engaged in divorce or separation situations must consider the Family, Estate and Real Estate implications to properly advise their clients.

Severing Joint Tenancy

Joint Tenancy can be severed in one of three ways:

1. An owner in joint tenancy unilaterally registering a transfer to themselves;
2. Mutual agreement; and
3. Course of Conduct

The simplest and most effective form of severing joint tenancy is by way of registration in the Land Registry. Where a joint tenant wishes to change the way title is held they may without notice to the other owner registering a transfer to themselves, thereby automatically severing the joint tenancy resulting in both owners holding title as 50/50 tenants in common.

Where tenancy is not severed unilaterally, the court may determine that joint tenancy is severed by a course of dealing. In Hansen Estate v. Hansen, 2012 ONCA 112, two owners were in the process of separating when one owner passed away without having severed joint tenancy to title. The surviving spouse took the position that the property would pass to her by way of survivorship. Chief Justice Winkler, held that her assertion that she would be entitled to the exclusive ownership was entirely inconsistent with their mutual intention to divide their assets upon separation¹. The course of conduct test, assesses the co-owners mutual intention and actions to determine whether they all treated their respective interests in the property as no longer being held jointly. 

While an intention to sever tenancy can be inferred by the conduct of the owners, reliance on such inferences invites uncertainty. It is best practice to sever tenancy through the Land Registry office to avoid unnecessary litigation.

Conclusion

Separation files involving real property require careful, coordinated analysis. Counsel must assess whether legal title reflects their client’s testamentary intentions, whether joint tenancy ought to be severed and remain mindful of the intersections between family, estate and real estate law when advising on these matters.

The distinction between joint tenancy and tenancy in common is more than a technicality. In the context of separation, it can directly affect ownership rights, litigation strategy, and the ultimate disposition of what is often the owner’s largest asset.

A failure to properly consider and address the form of co-ownership at an early stage may lead to unintended and, in some cases, irreversible consequences.

Footnote

^{1 para 65.}

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.