What Tenants in Common Means When Buying Property in Ontario

Buying a home or investment property with friends, siblings or other family members is common. One of the first questions is how the title will be held, because that choice affects what happens if someone dies, sells or falls out with the others.

This article explains tenancy in common in Ontario in plain terms and how it differs from joint tenancy. It is general information, and the way your own title is worded matters a great deal.

The Ontario default rule

Under the Conveyancing and Law of Property Act, R.S.O. 1990, c. C.34, s. 13(1), where land is conveyed to two or more persons (other than executors or trustees), they take as tenants in common, not joint tenants, unless the document shows an intention that they take as joint tenants.

Under s. 13(2), this applies even where one co-owner is the spouse of another. So a couple does not automatically hold as joint tenants. If joint tenancy is wanted, the transfer documents need to say so clearly.

Tenants in common versus joint tenants

The biggest practical difference shows up when an owner dies.

When a tenant in common dies, their share becomes part of their estate. When a joint tenant dies, the surviving co-owners inherit the deceased's share instead. How your own will deals with a share is worth confirming with a lawyer.

How shares and rights are set

How the owners divide their shares, and how decisions are made, is worth settling in writing before closing rather than after a disagreement. A lawyer can confirm how to record what you intend.

• What share each person owns, and how that matches what each person pays in.
• Who pays the mortgage, property taxes, insurance and repairs, and what happens if one person cannot.
• What happens if one owner wants to sell, or wants out.
• Whether the property will be lived in, rented out, or both.
• What each owner's will should say about their share.

A written co-ownership agreement, prepared with a lawyer, is the usual way to record these points.

If you rent the property out

If co-owners earn rental income, how the income and expenses are split between them is worth confirming with an accountant. For capital cost allowance, each co-owner enters only their own share. Land is not depreciable property, so capital cost allowance can be claimed on the building but not on the land. An accountant can help you split the numbers correctly.

Rental income is reported for the calendar year, January 1 to December 31. The CRA encourages landlords to use Form T776, Statement of Real Estate Rentals, although it also accepts other financial statements.

Here are some common items to understand before you start tracking costs:

• Current expenses are recurring costs with a short-term benefit and can usually be deducted in the year they are incurred, while capital expenses are generally recovered over time through capital cost allowance.
• Interest on money borrowed to buy or improve the rental property is deductible.
• Insurance premiums paid on the rental property for the current year are deductible.
• Property taxes are deductible for the period the property was available for rent.
• Labour and materials for minor repairs and maintenance are deductible, but you cannot deduct the value of your own labour.

Capital cost allowance cannot be used to create or increase a rental loss. If an owner rents only part of their own home, only the expenses for the rented area can be claimed, and shared costs such as property taxes and insurance are split by floor area or by number of rooms.

If a co-buyer is not a Canadian citizen or permanent resident

The status of each buyer can matter. Ontario's Non-Resident Speculation Tax is 25%, effective October 25, 2022, on residential property anywhere in Ontario (land with one to six single-family residences) bought by a foreign national, meaning an individual who is not a Canadian citizen or permanent resident. An exemption may be available where the buyer is a nominee, a protected person, or the spouse of a Canadian citizen or permanent resident.

Federally, the Prohibition on the Purchase of Residential Property by Non-Canadians Act bars non-Canadians from buying residential property, and the ban was extended to January 1, 2027. It covers buildings with three homes or fewer and parts of buildings, such as a semi-detached house or a condominium unit. Property outside Census Metropolitan Areas and Census Agglomerations is not covered. The regulations also set out exceptions. Whether the ban still applies when you buy, and whether an exception fits you, is worth confirming with a lawyer before you sign.

What to do next

• Decide together whether you want tenancy in common or joint tenancy before the offer is signed.
• Tell your lawyer how title should be held so the transfer says so clearly.
• Tell your lawyer early if any buyer is not a Canadian citizen or permanent resident.
• Put your share, cost-sharing and exit rules in a written agreement.
• Update your will to reflect your share if you hold as a tenant in common.
• Ask an accountant how rental income and deductions will be split.

Frequently asked questions