Co-owners of real property may have different intentions for the land they own. Suppose one owner wants to sell but recognizes the challenges of marketing a fractional interest; the other owner objects outright to any sale. When these plans conflict, disputes between owners may arise. Whose interest is to prevail?
This problem is not a new one. In 1539, English Parliament provided for a court’s partition – or subdivision – of the contested real estate. Much later another remedy was added: where partition of land was impractical, a court could compel the sale of the entire property. The sale proceeds would be distributed amongst the co-owners in proportion to their respective interests.
Today in Ontario, the Partition Act applies. A more descriptive name for this law would be the “Partition or Sale Act” since a court may grant a party either remedy. However, the name of the Partition Act does reveal something telling, since a court will consider partition before sale. The remedy the court selects will depend, in large part, upon the property in question. Certain properties lend themselves far more readily to partition, which is the breaking up of a single property into parts, than other properties. For instance, where partitioning vacant land may make sense, it is impractical with respect to a condominium unit. Since partitioning a typical condominium unit is undesirable, a sale is more likely to be endorsed by the court.
Generally a court will grant a request for partition or sale. If malice, oppression or vexatious conduct are on display, the court retains discretion to refuse partition or sale, though this power is invoked sparingly. Further, it is up to the party opposing partition or sale to justify their position. The Partition Act is not a vehicle for a court to convey one co-owner’s interest in a property to the other co-owner. However, where a property is ordered sold, the other co-owner(s) may bid.
The operation of the Partition Act can be complicated by mortgages, family law, and planning legislation. Where mortgages are involved, notice to, or consent from, the mortgagee may be required. In matrimonial disputes, it may be necessary to defer a Partition Act application until matrimonial property claims are resolved. And when it comes to a court order for partition, the provisions of the Planning Act must be observed – or else the partition order has no legal effect.
Significantly, co-owners can contract out of the Partition Act. In other words, if a co-owner waives their right to resort to the Partition Act, that co-owner cannot then expect a court to employ the Partition Act to contravene the contract.
No one goes on title of real property expecting to dispute with, and litigate against, a co-owner (or several of them). Yet such conflicts do arise. They are particularly likely where co-owners may have divergent plans for the use and development of a property, or where co-owners have a history of disagreement. A co-ownership agreement, negotiated by the co-owners and signed before problems arise, will prevent these problems and is normally recommended.
Contact Lerners LLP today to discuss your co-ownership agreement – or your Partition Act application.