Writing a Tenants in Common Agreement in Ontario

Buying a home or investment property with a friend, sibling or partner is common, but the paperwork that registers title does not answer most day-to-day questions. Who pays for a new roof? What if one person wants out? What happens on death?

A written tenants in common agreement lets you answer those questions in advance. Its terms are a matter of contract between you, so there is no fixed form. This article sets out what to think about and why.

Why a written agreement helps

Unless the instrument shows an intention to create a joint tenancy, land granted to two or more people goes to them as tenants in common, and this applies even if they are spouses. The default tells you how title is held, but it does not set out how you share costs, make decisions or leave the arrangement.

A share held as a tenant in common does not carry the right of survivorship that joint tenants have. That is why death and estate planning deserve their own clause.

Clauses to consider

• Shares: the percentage each person owns, and whether it matches what each contributed.
• Down payment and closing costs: who paid what, and whether it is treated as a loan or as ownership.
• Ongoing costs: mortgage, property tax, insurance, utilities and repairs, and who pays each.
• Major repairs and improvements: how much can be spent before everyone must agree.
• Use of the property: who lives there, whether renting is allowed, and how rent is shared.
• Buyout: how a share is valued, who has the first chance to buy, and how long payment may take.
• Right of first refusal: whether a selling owner must offer their share to the others first.
• Selling the whole property: who can start a sale, and how the price and agent are chosen.
• Death, incapacity and bankruptcy: what happens to a share and who has the option to buy it.
• Separation or divorce of one owner: how a spouse's claim is handled.
• Dispute resolution: for example, a mediation step before going to court.

None of these clauses is set by a statute, so the wording is up to you. Clear wording is the point: vague terms invite disagreement later.

Mortgage and default clauses

Where there are several chargors, the covenants implied in a registered charge, including paying the mortgage money, are made jointly and severally unless the charge says otherwise. Each co-owner can therefore be liable for the whole debt. Your agreement cannot change what the lender can claim, but it can set out how co-owners must make each other whole.

• What happens if one owner misses a payment and another covers it.
• Whether the covering owner gets interest, a larger share, or the right to buy out the defaulting owner.
• How quickly a missed payment must be made up.

Lenders must also follow a process before power of sale: the default must continue at least 15 days before notice is given, and the sale cannot happen until at least 35 days after notice. A default clause with short internal deadlines helps owners act well inside those periods.

Exit rights, court sales and spouses

Joint tenants and tenants in common may be compelled to make or suffer partition or sale of the land. The Court of Appeal for Ontario holds that co-owners have a prima facie right to force a sale. The court refuses only if the applicant is acting maliciously, vexatiously or oppressively, and age, illness and claimed hardship were not enough in Inniss v. Blackett.

An agreement can set a process, such as notice periods, valuation and buyout first, before anyone goes to court. Whether a court would enforce a given waiver of partition rights is a question for a lawyer.

Spouses should know that a spouse may not dispose of or encumber an interest in a matrimonial home unless the other spouse joins or consents, has released their rights by separation agreement, or a court order authorizes it. Where land passed by will or on intestacy, no partition proceeding may be taken until one year after the death.

What to do next

• Talk through each clause above with your co-buyers before closing, not after.
• Write down contributions and the shares you intend, with numbers.
• Decide how a share will be valued and who may buy it first.
• Update your wills so they match the agreement.
• Have a lawyer draft or review the agreement and confirm how it fits with the transfer and mortgage.
• Store signed copies somewhere every owner can reach.

Frequently asked questions