Unloading in the evening

Unloading in the evening

Wednesday, September 4, 2019

It’s time to part ways - breaking up co-ownership of property


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.