Can Tenants in Common Rent Out a Property and Share the Income in Ontario?

You and one or more co-owners hold a property as tenants in common and want to rent it out. You may be wondering who is the landlord, who pays for repairs, and how each of you reports your share of the rent.

The tenant has rights that do not depend on how you split things privately, while the split among owners is largely up to you. This article separates the two and points out where to get advice.

Co-owning as tenants in common

Unless the document that transferred the land shows an intention to create a joint tenancy, land granted to two or more people goes to them as tenants in common, even if they are spouses.

No statute lists what a tenants-in-common agreement must cover. Shares, expenses, buyouts and what happens on death are matters of contract between you. If you plan to rent the property, a written agreement is the best place to record who manages it, who pays what, and how decisions are made.

Your duties as landlords toward the tenant

However you divide things between yourselves, the tenant is protected by the Residential Tenancies Act, 2006 (RTA). It applies to rental units despite any agreement or waiver to the contrary, and any lease term that conflicts with it is void.

• For most private rentals, landlords must use the Ontario standard lease for new leases. If a tenant asks in writing and does not receive it within 21 days, the tenant may withhold one month's rent.
• A landlord may ask for credit references, rental history and permission to run a credit check, and may use these to select or refuse an applicant.
• The only security deposit a landlord may collect is a rent deposit, and it can be no more than one rent period or one month's rent, whichever is less.
• Neither a landlord nor a lease may require post-dated cheques or other negotiable instruments for rent.
• Everyone has a right to equal treatment in the occupancy of accommodation without discrimination on grounds such as family status, marital status or receipt of public assistance.

Whether a rental unit needs a licence or registration depends on the local municipality's own by-law. Check with your municipality before you advertise.

Dividing rent and expenses

Because these are matters of contract, owners usually agree in writing on points like these:

• Who collects the rent and where it is deposited.
• How rent and expenses such as repairs, taxes and insurance are divided, and whether that follows each owner's share.
• Who deals with the tenant, including notices and entry to the unit.
• What happens if one owner cannot pay a share of an expense.
• How an owner can sell or be bought out.

If the property is mortgaged, remember that each co-owner who signed the charge can be liable for the whole debt unless the charge says otherwise. A missed contribution by one owner can therefore become a problem for all.

Reporting rental income and selling

How each owner reports their share of the rental income depends on the facts, including your agreement and how you each own the property. This is a good point to confirm with an accountant.

Some general tax rules are worth knowing. Capital cost allowance (CCA) cannot be used to create or increase a rental loss. When you sell, selling a rental property for more than it cost may produce a capital gain, reported on Schedule 3, Capital Gains or Losses. For 2025, the capital gains inclusion rate is generally one-half.

If CCA claimed in earlier years is more than the undepreciated balance left in the class when you sell, the excess is a recapture, which is added to income in full, not at the capital gains inclusion rate. Legal fees paid on the sale are deducted from the proceeds of disposition, not claimed as a rental expense.

What to do next

• Confirm on title that you hold as tenants in common and in what shares.
• Sign a written agreement covering management, expenses, income and exits before the first tenant moves in.
• Check the local by-law on licensing or registration.
• Use the Ontario standard lease and follow the rules on deposits and rent payment.
• Keep clear records of rent received and expenses paid, shared by all owners.
• Ask an accountant how each owner should report their share, and a lawyer about the agreement.

Frequently asked questions