Land Ownership: a Primer
The man who says he is willing to meet you halfway is usually a poor judge of distance. ~ Laurence J. Peter
When more than one person wishes to own the same piece of land, there are several options available. In previous articles we addressed the fact that the individuals could incorporate, form a partnership, or enter into a joint venture arrangement.
But there is another, more elemental layer to this. If more than one party (individual or corporation) is to appear on title to the property being acquired, it is important to understand there are two types of ownership interests available with respect to registration of title: Jointly and Tenants-in-Common.
Jointly
This is the default and most common form of ownership. Essentially, all owners of the property jointly own all aspects or rights of the entire title.
Let me quickly digress for a moment.
There are three title ownership categories that modern society has inherited from English law. Fee simple is the most absolute form of ownership we have here in Canada but it s important to note that such title is not actually absolute. It s subject to restrictions and reservations on behalf of the Crown (or different levels of government). These reservations could be expropriation rights, mines and minerals, taxation and so forth. So we really hold title at the will of the government in some sense. The other ownership interests are a life estate (where one holds title only during one s lifetime) and a leasehold interest (where one holds title only for a specific period of time). If you purchase land in Banff National Park for example, you are likely only purchasing a leasehold interest in that land.
You can own any of these interests jointly and if you do, then what comes along with that is the right of survivorship. This means that if one joint owner dies, the other joint owner(s) automatically take over interest in the property. It never enters the estate of the deceased, and no beneficiary of the deceased would have an interest. It is also less likely to undergo a property valuation for deceased estate purposes which often happens when there is no joint ownership. This is significant to investors. If two business partners buy a house in Vancouver, own title jointly, and one dies, the other owner gets it all with the title being transmitted into the survivor s name alone. That is not likely the intent in business arrangements (but specifically may be the intent where a husband and wife buy a house together). So be careful how your lawyer describes you on the title. The question is not a throw-away. It has implications. QUOTE
Tenants-in-Common
The other way to hold title is quite different. Unlike joint ownership, tenants-in-common ownership does not carry the right of survivorship. Owners in fact hold a specific percentage of the total. So, if a party dies and she owns an undivided 50% interest in the property, her 50% ownership interest will pass to whoever she has indicated in her will. This has implications in investment situations as well. Is it the intent that the survivor has to deal with the deceaseds’ sixth cousin twice removed? Or the deceaseds’ spouse? That could happen. We usually recommend some sort of joint venture agreement that addresses the certainty of death (and taxes too). Where there is a good joint venture agreement, there should also be a corresponding registration against the title on behalf of whoever holds the beneficial interest in the property so that anybody that may inherit title would take subject to that beneficial interest. This may trigger a contractual obligation that requires the estate of the deceased to offer its interest for sale to the survivor. If at the time, one-half of the owners were living on the property when they died, then the other half of the partnership would need to contact a Deceased estate rubbish removals service to remove certain items that have not been claimed by their family. This can be discussed when drawing up a contract if required.
So whenever you have two or more parties that are to have an interest in land, it is imperative to have the title registered correctly so it corresponds to your business goals. Talk to your lawyer about this and don t take it for granted that he or she will bring the topic up.
Darren Richards is a partner with Richards Hunter Toogood. He focuses on both residential and commercial Real Estate and Corporate/Commercial Law serving both small and medium-sized owner-managed businesses in the Edmonton and surrounding region. Mr. Richards also acts for major banking institutions and other lenders in relation to their commercial loan facilities. Reach him at: d.richards@rht-law.ca.
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