Selling the Family Farm: Dealing with Jointly Held Property

Disputes regarding jointly held real property are some of the most common that arise between separated spouses, and often the most contentious. In addition, it is not uncommon for spouses to own property jointly with third parties, such as parents, which only serves to complicate these disputes.

This post will explore the differences between the various types of legal ownership in property, and their consequences in the family law context.

What are the different types of jointly held property?

Generally speaking, there are two common types of joint-ownership arrangements for real property: joint tenancy and tenancy-in-common.

1) Joint Tenancy

Where two or more people own a piece of property in joint tenancy, they are said to own a one-half interest in the undivided whole – meaning that each owner owns all of the property, and not just a defined proportion of it.

2) Tenancy-in-common

Where two or more people own a piece of property as tenants in common, each person has a defined ownership stake in the property (e.g. 33%).

In both of these instances, the type of ownership, and the various ownership stakes, will be registered on the title of the property and reflected in the parcel register.

Right of survivorship

While there are a number of differences between joint tenancy and tenancy-in-common, practically speaking the main difference is the right of survivorship that is entailed in joint tenancy and does not exist in a tenancy-in-common.

Where there is a right of survivorship and one joint tenant passes away, their interest automatically transfers to the other joint tenant. Where owners are tenants-in-common and there is no right of survivorship, a deceased owner’s interest forms part of that person’s estate.

The benefit of having a right of survivorship is that, because the deceased’s interest does not “go into the estate”, no estate administration tax will be payable for the property. This can result in a person or family saving tens of thousands of dollars in taxes.

It is therefore becoming a common estate-planning measure, and spouses now often register family homes in joint tenancy.

What happens where the rubber hits the road?

For spouses who separate, there are a number of consequences and considerations that flow from who owns the property, and in what character, and whether the parties were married or not.

For most separating spouses, they will agree to sell any jointly held property, or one spouse will buy out the other’s interest. If the parties are in agreement about a buy-out or listing the house for sale, there are usually very few issues. It is where there is disagreement that disputes can arise.

a) For married couples

For married spouses, there is a significant difference in how property is treated whether the home can be classified as a matrimonial home or not. Under section 18(1) of the Family Law Act, matrimonial homes are any property in which one of the spouses has an interest and was ordinarily inhabited by the spouses on the day they separated.

If a property is a matrimonial home, the Family Law Act imposes restrictions on a spouse’s ability to deal with the property, regardless of who owns it; namely, neither spouse can encumber, dispose or otherwise deal with the property without the other spouse’s consent. However section 23 of the Act does allow the Court to order the sale of a matrimonial home if one spouse is unreasonably withholding their consent to the sale.

If the jointly held property is not a matrimonial home, then the court can compel its sale under section 9(1) of the Family Law Act in the context of a claim for equalization, or under section 2 of the Partition Act.

b) Unmarried spouses

Unmarried spouses do not have access to the rights regarding a matrimonial home under the Family Law Act – the law treats them the same as any other two individuals who own real property together. Where one spouse wishes to sell the property and the other does not, that spouse will have to bring an application in Superior Court under the Partition Act to have the home sold.

Where a spouse is not married and not on title, they have no legal right to resist the sale of a house, even if they have lived in it for many years, though they may have other claims in relation to the property (which are not discussed here).

The Court of Appeal confirmed in Latcham v Latcham that unless the person compelling the sale is doing so with malicious, vexatious or oppressive conduct, the court has little discretion to refuse to make an order for the sale. For the spouse that does not want the house sold, this is a very high bar to meet and, in most cases, the court will grant the order.

Take-aways

Property issues in family law can be complicated, time-consuming and expensive.

It is always best to consult with an experienced family lawyer before proceeding to deal with any jointly held property. If you are separating from your spouse and have questions about your property, contact our Family Law Group.