What happens when you own real property with someone as joint-tenants and the person with whom you own the property owes a judgment debt to a third-party. Does the third-party creditor’s right to enforce their judgment debt take priority over your potential interest in the property, such that the third-party creditor could seize funds from the property which otherwise would have gone to you as the joint-owner, or does the third-party creditor only have the ability to enforce their judgment against the 50% of the property which is owned by the person who owes the debt?
In Senthillmohan v. Senthillmohan, 2023 ONCA 280, the Ontario Court of Appeal was asked to determine whether a judgment debt against only one joint-tenant took priority over the interests of the other joint-tenant, such that the creditor could seize more than 50% of the value of the property to satisfy their debt. In Senthillmohan, a husband and wife who were in the process of divorcing owned a property as joint-tenants. A third-party creditor obtained a default judgment against the husband alone, and when after the sale of the property the third-party creditor moved to seize more than 50% of the proceeds of sale pursuant to a Writ registered against the husband alone, the wife brought a Motion seeking the release of 50% of the proceeds of sale to herself arguing the creditor could not seize her 50% interest in the property when she did not personally owe the debt.
The third-party creditor to support their claim to more than 50% of the proceeds of sale cites jurisprudence such as Zeligs v. Janes, 2016 BCCA 280, and Royal & SunAlliance Insurance Co. v. Muir, 2011 ONSC 2273, in support of the position that when two people own property as joint-tenants each joint-tenant “holds everything and yet holds nothing”, and that the two joint-tenants are in effect one undivided owner until the joint-tenancy is severed.
The Court of Appeal ultimately rules in favour of the wife, directing the release of 50% of the proceeds of sale to her as joint-owner. In coming to such a conclusion, the Court of Appeal states the creditor’s arguments represent a misunderstanding of the law of joint-tenancy, and that a joint-tenancy can be automatically severed when a creditor moves to seize real property held on a joint-tenancy when the debt is only owed by one joint-tenant, stating:
“The process of seizure and execution on debts only contemplates the execution against the debtor’s exigible interest in the land held in joint tenancy. For instance, when a sheriff takes sufficient steps to seize property, the joint tenancy is severed and, once severed, the debtor joint tenant has no claim to the whole. So, too, for the creditor, who can now execute against the debtor’s share of the tenancy in common.” [emphasis added]
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