Tenants in Common Problems in Ontario and How to Avoid Them

Buying a home with a friend, partner or relative as tenants in common can make the purchase possible. It can also create problems that nobody planned for: who pays the mortgage when one person loses income, who decides on a new roof, who gets to live in the home, and how someone leaves.

Most of these disputes are predictable. This article walks through the common ones and explains what Ontario's co-ownership guidance says a written agreement should cover. It is general information, not advice on your situation.

What being a tenant in common means

Tenants in common each own a share of the property. The shares can be equal or unequal, and decision-making can follow the size of each share.

The key difference from joint tenancy is what happens on death. A tenant in common's share does not pass automatically to the other owners; it becomes part of their estate. Joint tenants' shares pass to the survivors. How this plays out in your situation depends on the facts, so it is worth confirming with a lawyer.

The disputes that come up most often

Notice that every row has the same fix: deciding the rule in advance, in writing, while everyone is still getting along.

What a co-ownership agreement should cover

Ontario's guidance on co-ownership agreements lists the topics a good agreement should address. Use it as a checklist when you sit down with your co-owners.

• Decision-making: how choices will be made among the owners.
• Use and occupancy: who lives there, who may rent a room, and on what terms.
• Funding: how the mortgage, taxes and repairs are paid.
• Each owner's contributions, so there is a record of who put in what.
• Compensation if an owner breaches the agreement or misuses funds.
• Mediation or arbitration for disputes.
• Entry and exit: how a new owner joins and how a departing owner leaves.

Exit terms deserve extra attention. The guidance says they should cover how fair market value is set and whether the other owners, a third party or a sale will take over a departing share.

When the dispute cannot be settled

Without an agreement, a disagreement can end up in court. Under the Partition Act, tenants in common may be compelled to make or suffer partition or sale of the land. A person interested in land may bring an action or application for partition or for sale, if the court considers sale more advantageous to the parties interested.

The Court of Appeal has said a co-owner has a prima facie right to force a sale, and that the party resisting sale must show why the property should not be sold. How this applies to your situation depends on the facts, so it is worth confirming with a lawyer.

If money has been unequal, courts have looked at it. In one case the Court of Appeal ordered a sale, awarded occupation rent for one owner's sole use of the lot, and said the owner who paid the mortgage and property tax may be entitled to reimbursement. In another, an owner who paid the carrying costs was given 65% of the property's value instead of an equal split. The outcome turns on the facts, which is why records of contributions matter.

What to do next

If you are about to buy with others, or already own and have nothing in writing, it is worth fixing that now.

• Check how title is held: tenants in common or joint tenants. A joint tenancy can be turned into a tenancy in common if one owner registers a transfer to themselves.
• Write down what each person has paid so far and what each is expected to pay.
• Agree on what happens if someone cannot pay, wants to move in, or wants out.
• Think about wills, since a tenant in common's share goes into their estate.
• Have a real estate lawyer draft or review the agreement so that it fits your facts.

Frequently asked questions