In
Ontario, the Partition Act allows a
co-owner of property to apply to the Court to break up the co-ownership. If two or more parties own a piece of land,
and one wants out, that co-owner is generally entitled either to an order
dividing the property itself or, more often, an order requiring the sale of the
jointly held property and the division of the proceeds. The Court has a discretion to refuse to grant
partition or sale in circumstances of “malice, oppression, and vexatious
intent”, but the bar for exercising this discretion is high. Also, the Court may in certain cases award
one owner a greater share of the property or proceeds of sale than the other
co-owner or owners, in spite of the presumption that tenants in common with
unspecified ownership interests are entitled to equal shares of the property or
proceeds. A common argument in favour of
unequal division is that one co-owner contributed more to the property than
another and should be compensated for it (based on the law of unjust
enrichment).
In
one recent case, the Ontario Superior Court of Justice addressed the question
of whether a property should be divided in pieces or sold. Two former brothers-in-law were disputing
how their co-ownership of a 100-acre farm parcel (consisting of 64 acres of
agricultural land, and 36 acres of woodlot) should be ended. Brother-in-law O made the application to the
Court for an order to sell the property and divide up the sale proceeds. Brother-in-law M, who lived part of the year
in a small house on the woodlot portion, asked the Court instead to divide up
the land itself. M proposed that he
receive the 36-acre woodlot along with a continuing interest in the 64-acre
balance. The 64-acre section would then
be sold with O receiving the largest portion of the proceeds of sale to compensate
for M getting the woodlot.
As
is the case in most partition applications, the Court ordered that the entire
property be sold and the proceeds of sale divided between the two co-owners
because the land could not be reasonably partitioned. Firstly, the Court found that the local
municipality would impose restrictions on the land if it was severed that would
affect the value of the land, something that would prejudice of O. Secondly, M's proposal would result in what
would effective be a forced sale by O to M of the woodlot portion of the
property, something that the Court does not have jurisdiction to grant. Thirdly, M's proposal would compel the two
co-owners to continue, at least for a time, in an "ongoing, untenable
relationship"; avoiding that situation is a primary purpose of the Partition Act. The Court rejected M’s proposal, and also ordered
that O's costs of the application be payable out of M's share of the proceeds
from the sale of the property.
In
another recent case, the Superior Court dealt with a request for an unequal
split of proceeds of sale. A mother, the Applicant, and her daughter, the
Respondent, disputed the division of the proceeds from the sale of a property
they had owned together. The mother had
purchased the property in the early-1980s with her then common law spouse, the
father of the Respondent. The father
died in 2009 and left his share of the property to his daughter. The property was sold in 2015, and mother and
daughter agreed to split on an equal basis a portion of the proceeds of the
sale (representing the 2009 appraised value of the property). The remaining proceeds were held in trust to
be disputed. The mother brought an
application seeking an order dividing the remaining proceeds equally between her
and her daughter.
Relying
on unjust enrichment, the daughter claimed an unequal share of the remaining
funds – three-quarters of the remainder for her, and one-quarter of the
remainder for her mother. The daughter had
acted as Estate Trustee of her father’s estate, and took the position that the
increase in the value of the property between 2009 and 2015 was attributable to
“her money, time and effort.” She had
entered into an agreement with a farmer to clear the property and install tile
drainage, which rendered 35 acres workable.
As such, she argued, the mother was unjustly enriched at the expense of
the daughter, without legal justification.
The
judge hearing the case disagreed. While
she found that the increase in value benefitted the mother, it also benefitted
the daughter. And the judge was unable
to put a monetary value on the efforts contributed by the daughter. With respect to the agreement reached with
the farmer who cleared and tiled the land, the judge questioned “whether the
time required to achieve the agreement took 30 minutes, 30 days, or 300 days of
negotiations.” The land clearing and
tiling may have contributed to the increase in value of the property, but the
daughter’s only contribution to this was negotiating, creating and signing two
agreements. The judge ordered that the
remaining balance of the proceeds of sale be divided equally between mother and
daughter.
Read the decisions at: Brother-in-law v. Brother-in-law and Mother v. Daughter.
