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It is taken for granted that, if a home is owned jointly, the full interest in the home will pass to one party upon the death of the other, by right of survivorship. While it has always been possible to sever a joint tenancy by mutual agreement or unilaterally (typically by one owner registering a deed to themselves as a tenant in common), there is a rarely-used third method, referred to as the ‘course of dealings’ rule. A recent decision from the Ontario Superior Court of Justice demonstrates how this method of severing joint tenancy may create a greater degree of uncertainty in the right of survivorship.

Joint Tenants at Time of Death

A man and his second wife purchased a home together as joint tenants in 2004. The husband had children from his previous marriage, two daughters and a son. The husband executed a will in 2015. In the will, the husband effectively creates a life estate for his wife with respect to the home, in which he directs the estate trustee (ET) to allow her to remain living in the home until her death, or until one of several other enumerated events occurs. Upon the termination of the life estate, the property is to be sold, with the husband’s share forming a part of the residue of his estate. The husband’s two daughters were the residual beneficiaries of his estate.

Two and a half years after their father passed away, the daughters commenced an application seeking an order declaring that they were entitled as residuary beneficiaries to a 1/2 interest in the property. They further sought an order directing the ET to sell the home and disperse the proceeds accordingly.

In response, the wife registered a Survivorship Application on title to the property and commenced her own application seeking a declaration that she was the sole and beneficial owner of the home.

Severing Joint Tenancy

The court had to first determine whether the joint tenancy ownership had been severed in some way before the husband’s death. A 2012 decision of the Ontario Court of Appeal endorsed three methods for severing joint tenancy:

  1. By unilaterally acting on one’s own share, such as selling or encumbering it (typically an owner will register a deed to him or herself);
  2. By mutual agreement; or
  3. In the course of dealings in which the parties demonstrate an intention to own the property as tenants in common.

The parties to the case at hand agreed that if the joint tenancy had been severed, it would have been by way of the third method, via the “course of dealings”. In order to make this determination, the court was required to consider the totality of the evidence.

The court considered three pieces of evidence in particular:

  1. The will – there was a clear intention on the husband’s part to create a life estate that is inconsistent with joint tenancy. The common law has established that joint tenancy cannot be severed by testamentary disposition alone. However, if the wife knew about the provision, it could help to establish that both parties contemplated their ownership as tenants in common.
  2. Recorded conversation – one of the daughters recorded a conversation between the wife and her husband while in the hospital. While the court could not determine whether the recording had been made surreptitiously, the evidence was deemed to be admissible.  In the recording, the wife could be heard acknowledging the daughter’s share in the home and her life estate under the will. She also appeared to take credit for the terms of the will, saying that had she not insisted the husband sign it, his daughters would not be entitled to a half interest in the home.
  3. An affidavit from a family friend – a long-time family friend of the husband swore an affidavit which stated that she had met with the couple prior to the husband’s death and they discussed his will and his intentions for his estate. The friend said he had asked her to act as an alternate ET, and had mentioned that he intended for his daughter’s to eventually receive his share in the matrimonial home. The affidavit was hearsay, and not sufficient evidence in an of itself, however, it did serve to corroborate the contents of the will and the recorded hospital conversation.

The Court’s Findings

The court found that both the terms of the will and the recorded conversation established that the parties had both intended to treat their ownership of the home as that of tenants in common. The affidavit of the family friend corroborated this. As a result, the court held that, in the course of dealings, the husband and wife had successfully severed their joint tenancy.

The court dismissed the daughter’s application to order the ET to sell the home. The will was very clear about establishing a life estate for the wife and the daughters had no right to demand their inheritance prior to the time contemplated in the will. If there was a breach of the terms of the life estate, it was entirely up to the ET to make that call. The daughters did not hold a legal interest in the land until the life estate was terminated.

What Does This Mean for the Future of Joint Tenancy Ownership?

This case demonstrates that property owners cannot solely rely on the fact that title to their home is held in joint tenancy in order to ensure a right of survivorship. While it is a key factor, parties should also be cautious about how they discuss their intentions with others, and how they structure their estate. Any apparent deviance from an intention to maintain the joint tenancy may be sufficient to extinguish it in court. When drafting any legal documentation, including an estate plan, a will or a domestic agreement that addresses ownership of a jointly-held property, seek the advice of a skilled and knowledgable lawyer to ensure that your intentions are made clear.

At Baker & Company, our experienced Toronto lawyers can help you ensure that your property ownership structure and estate plan accurately reflect your intentions and future plans. We have extensive experience and expertise in providing clients with estate planning and family law advice that contemplates real estate interests, both simple and complex. Call us at 416-777-0100 or contact us online for a consultation.

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