Tag: severance

04 Jul

Severing Joint Tenancy: Pitfalls to Guard Against

David M Smith Beneficiary Designations, Common Law Spouses, Estate Planning Tags: , , , 0 Comments

Joint tenancy is a great way for parties to hold property when there is a common desire to pass the property by right of survivorship to the surviving joint owner.  However, when the relationship between the parties fails, proactive steps must be taken to sever the joint tenancy to ensure that the title-holding reflects the new reality of the dissolved relationship. Case law is littered with examples of spouses who did not take such steps.

MacNeil Estate v. Bower, a recent decision of the Ontario Superior Court of Justice, is a good example of how litigation can ensue when arrangements don’t fully keep pace with the reality of a failed relationship.  In this case, Robert and Mark began a conjugal relationship began in 1995 and the relationship progressed such that Robert designated Mark as beneficiary of his RRSP and group life insurance in 2007.  In 2008, Robert and Mark purchased a property as joint tenants, notwithstanding that Robert contributed the entire down payment approximating about 20% of the value of the property. In 2010, the relationship between the two ended and Robert entered into a new relationship.  Thereafter, Robert became seriously ill and began to arrange his affairs such that he changed his beneficiary designations and sought legal advice to draft an agreement changing title to the townhouse to tenancy in common.

Litigation ensued because the Agreement was not finalized and executed before Robert died.  Mark claimed right of survivorship as title was still held in joint tenancy.  Robert’s Estate Trustee argued that the joint tenancy had in fact been severed regardless of the incomplete status of the Agreement.

Severing joint tenancy requires one of: (i) a unilateral act affecting title, (ii) a mutual agreement between the co-owners to sever the joint tenancy, or (iii) any course of dealing sufficient to clearly demonstrate or intimate that all owners’ interests were mutually treated as constituting a tenancy in common.  In MacNeil, the Court found that both the second and third types of severance were realized.

Thanks for reading,

David Morgan Smith

09 Aug

Severance of a Joint Tenancy by Course of Dealing

Laura Betts Estate Planning, Executors and Trustees, Litigation Tags: , , , , , , 0 Comments

Whether a property is held as a joint tenancy or as a tenancy in common can have a significant impact on the overall value of an estate.

Where a property is held as a joint tenancy, and one of the owners dies, his or her interest passes to the surviving owner by right of survivorship.

Where a property is held as tenants in common, the deceased owner’s share of the property passes to his or her beneficiaries pursuant to the terms of his or her Will or, where the deceased dies without a Will, in accordance with the laws governing an intestacy in Ontario.

The severance of a joint tenancy can often become a disputed issue in context of estate litigation.

A joint tenancy can be severed and converted to a tenancy in common in one of three ways:

  1. one owner unilaterally acting on his or her own share, such as selling, transferring or encumbering it;
  2. a mutual agreement between the co-owners; or
  3. any course of dealing sufficient to suggest that the interests of the joint tenants were mutually treated as constituting a tenancy in common.

Severance by course of dealing can occur without the knowledge of the registered joint owners and is particularly relevant in the context of property held by spouses who had separated, or were in the process of separating, prior to death.

JO8UW3FDNJThe legal test for severance by course of conduct is set out in the Ontario Court of Appeal decision in Hansen Estate v. Hansen, 2012 ONCA 112 at para 7 as “whether the parties indented to mutually treat their interest in the property as constituting a tenancy in common.” It operates so as to prevent a party from asserting a right of survivorship where doing so would not do justice between the parties.

The test does not require proof of an explicit intention or communication regarding severance of a joint tenancy, rather the party asserting severance must prove that the owners by their conduct treated their respective interest in the property as no longer being held jointly.

The cases in which severance by course of conduct has been successfully upheld generally involve couples who have taken formal steps to separate their interests. For example, where one spouse has moved out of the property, both spouses have retained lawyers in connection with their separation, a valuation of the property has been sought and/or one spouse has made an offer to purchase the other spouse’s share of the property.

However, each case will turn on its own facts. In Jurevicius v. Jurevicius, 2011 ONSC 696,  the Court found that the mere fact of separation was insufficient to establish severance, and in, Gorecki Estate v. Gorecki, 2015 ONCA 845, the Court found that while the relationship between the parties was falling apart, it had not yet reached a point at which they formed a mutual intention to treat their interests in the property as a tenancy in common.

Thank you for reading.

Laura Betts

16 May

Severance of Joint Tenancy by Course of Dealing

Hull & Hull LLP Estate & Trust Tags: , , , , 0 Comments

A joint tenancy may be severed in one of three ways: (i) unilaterally acting on one’s own share in a manner that is registered on title; (ii) a mutual agreement between the co-owners to sever; or (iii) any course of dealing sufficient to suggest that the interests were mutually treated as constituting a tenancy in common.

The third of these rules is often referred to as the "the course of dealing rule."   This is an equitable concept: the course of dealing rule operates so as to prevent a party from asserting a right of survivorship where doing so would not do justice between the parties. 

In Hansen Estate v Hansen 2012 ONCA 112, the Ontario Court of Appeal considered whether a course of dealing between spouses in the midst of a legal separation equitably severed the joint tenancy in place at the time of Mr. Hansen’s death.  In its analysis of the applicability of the course of dealing rule, the Court applied a quote from Professor Ziff: “the best way to regard matters is to say that equity will intervene to estop the parties, because of their conduct, from attempting to assert a right of survivorship.” The key factor is the expression of intention by the co-owners as evidenced by their conduct.  The Court goes on to say "the mutuality for the purposes of Rule 3 is to be inferred from the course of dealing between the parties and does not require evidence of an agreement."

The Court of Appeal found that the facts of the case established a course of dealing that severed the joint tenancy.  It is worth noting that the Court enphasised that each case in which this analysis is applied must be considered in the context of its specific fact matrix.

 

David Morgan Smith – Click here for more information on David Smith

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