Trevor Todd and Jackson Todd have over 60 years experience in estate litigation including a court ordered partition and sale of jointly owned property.
There are many advantages to owning property jointly with others, however, there is always the possibility of a falling out between the owners. When the parties are unable to agree on the selling of the property, or on how to divide the sale proceeds, it may be necessary to resort to legal proceedings such as the Partition of Property Act (“PPA”).
Section 6 of the PPA provides that when fifty percent or more of the owner(s) request it , the court “ must, unless it sees good reason to the contrary, order a sale of the property and may give directions.”
When a minority owner seeks an order for the partition and sale by the court, S.8 (1) of the Act authorizes that the court may order a sale of jointly owned property, and s. 8(2) provides that the court may not order a sale if one of the joint owners undertakes to purchase the share of the joint owner requesting sale.
If such an undertaking to purchase is given, s. 8(3) specifically authorizes the court to order a valuation of the share of the party requesting sale.
Accordingly, a joint owner(s) of at least a 1/2% interest has a prima facie right to an order for partition and sale, unless justice requires that no order should be made.
Marriage legislation such as S.97 Family Act SBC 2011 also gives authority to the courts to divide property, determine its ownership, and require partition and sale and payment to be made out of the proceeds to one spouse or both, in specified proportions or amounts.
- Court Discretion To Order Partition and Sale
The jurisdiction of a court to compel, partition or sale of lands under the PPA is discretionary (Evans v Evans (1951) 2 DLR 221 (BCCA)). In fact, there is a narrow discretion left to the court, to refuse an order for sale: Bard v Bird (1993) BCJ 1644 (BCCA).
The Court of Appeal has broadened the judicial discretion to be unfettered to allow courts to ensure justice between the parties: Sahlin v The Nature Trust of British Columbia 2011 BCCA at para.24.
The court’s discretion will turn on whether justice requires that an order for partition and sale not be made: Bradwell v Scott 2000 BCCA 576.
An example of the court invoking S.8 of the PPA was found in Haigh v Kent 2016 BCSC 333, where the plaintiff was awarded a 25% beneficial interest in the property on the basis of constructive trust as a remedy for unjust enrichment. The property was a large acreage resort of beachfront property that had been owned by the family for several decades. The property was rather unique and would have been impractical and unequitable to divide into individual lots.
The court therefore found that the appropriate remedy was to order that the plaintiff sell his interest in the property to the defendants pursuant to section 8 of the PPA.
- Various Issues
- Standing
In order to have the right to bring an action under the PPA, a plaintiff must have a possessory interest in the land. A possessory interest is a right to control property, including the right to exclude others, by a person who is not necessarily the owner. It has been characterized as requiring the petitioner to have an immediate right to possession of the land.
Pallot v Douglas 2017 BCCA 254, dismissed an appeal on the basis that the appellant did not have standing to apply for partition of a leasehold interest held by a trust property owned by the Baptist Church, as he had no possessory interest in the trust.
However, in Aho v Kelly 1998 Carswell 1285, the court held that the minority owner of property, who also held a life estate in the same property, had the right to capitalize the life estate and force a sale of the property under the PPA. The other two co-owners could not partition the property while the life estate was in place, but the holder of the life estate could, and so a leasehold interest was sufficient for standing to bring the action.
- Conduct of the Sale
In Kainith v Brar BCSC 1552, the court granted partition and gave directions for the purpose of affecting the sale and appointing the person who was to have conduct of the sale.
There is also authority for conduct of sale under Supreme Court Rule 13- 5(4)(a).
The three factors the court may consider when determining whether to award one party sole conduct of sale are:
- willingness to facilitate the sale;
- inability of the parties to agree on routine aspects of the sale; and
- inability of the parties to cooperate.
- Occupational Rent and Ouster
A claim for occupational rent can only be successively brought where one owner has been ousted from the property by another. Most of the cases in which ouster are considered concern co-owners who have at one time shared possession of the property, and one co-owner subsequently is wrongfully dispossessed and excluded from possession of the property. Ouster generally involves a question of intent.
A useful discussion of the background to a claim for occupation rent is found in Baker v. Baker [1976] 3 W.W.R. 492. Baker was a case of partition and sale of a property held in joint tenancy. It concerned the break-up of a marriage where the parties had lived in the same home.
The discussion of occupation rent in the Baker case arose in circumstances of “constructive ouster.”
However, the court adopted as a general principle that “‘occupation rent’ is not necessarily measured by either the rental value of the property or the rent which an ousted owner may have to pay for accommodation elsewhere. It is, simply, a form of compensation” (at 501).
The court in Baker goes on to refer to a series of quotations from old cases in equity at 495-496:
“What is just and equitable depends on the circumstances of each case. For instance, if the tenant in occupation claims for upkeep and repairs, the Court, as a term of such allowance, usually requires that the claimant shall submit to an allowance for use and occupation.
…if one tenant has made improvements which have increased the selling value of the property, the other tenant cannot take the advantage of increased price without submitting to an allowance for the improvements
…when…one tenant has paid more than his share of encumbrances, he is entitled to an allowance for such surplus…
…a co-owner in occupation should be permitted to deduct only payments on account of principal, but she would be able to deduct payments on account of mortgage interest, taxes and repairs during her period of occupation if she agreed to submit to an allowance for use and occupation.”
- Adjusting Accounts
Almost all partition proceedings have an element of who paid for what, that may require an accounting. The parties often agree that the property should be sold, but disagree on the distribution due to disputes about their respective contributions or lack thereof.
Hedrick v Graham 2012 BCSC 1760 held “the law is clear that on sale in lieu of, the court may “make all just allowances and give such directions as will do complete equity between the parties” (Dacyshyn v. Semeniuk, 2007 BCSC 71 at para. 43, citing Baker v. Baker, [1976] 3 W.W.R. 492 at p. 495)
It is a principle of equity that if that if the occupant of the home is claiming for improvements made to the property, these improvements must be offset by the benefit of the occupancy.
- Cases Where Partition and Sale Were Ordered
Zimmerman v Vega 2011 BCSC 757
Four family members purchased a property as equal joint tenants intending to build a ski chalet as a long-term investment. Severe differences between the parties occurred which led to proceedings under the PPA.
The court reviewed the law, finding that section 6 of PPA is mandatory unless there is good reason to the contrary, while section 8 is discretionary. Section 6 must be applied unless the respondent demonstrates that justice requires that the order not be made: Harmeling v Harmeling (1978) 90 DLR (3d) 208 BCCA.
The court found that the parties had not entered into an agreement as to how long the property would be kept, how the proceeds would be divided, nor how it would be decided when the property would be sold. There was no good reason to the contrary not to order a sale of the property.
Sundberg v Sundberg 2022 BCSC 2188
Three parties equally purchased a property as a long term hold. There was no clear and
detailed written agreement setting out the co-owners’ respective rights and responsibilities concerning the property and each other, or providing for such foreseeable contingencies such as the marital dissolution that occurred. The court concluded that the respondent’s true reason for opposing the sale came from an emotional attachment to the property, which was found by the court to not constitute a good reason to the contrary, within the meaning of section 6 of the Act.
Er Borg BCSC 554
In this case, the respondents had desired to settle the accounting between the parties before any sale. There was also a concern about the potential need to pay a mortgage prepayment penalty, but neither reason prevented the sale from being ordered ahead.
- CASES WHERE PARTITION and SALE WERE REFUSED
The onus is on the respondent opposing the partion/sale to prove that justice requires that an order for sale not be made: Caple v Dolman (1999) 70 BCLR (3d) 325.
Bradwell v Scott, 2000 BCCA 576, stated that good reason for refusing an order under S. 6 PPA can include serious hardship to a respondent, lack of good faith, vexatious notice or maliciousness and the list is not closed.
In Desta v Tradessse 2015 BCSC 1183, the court declined the partition and sale on the basis that the co-owner became such by reason of impersonation and fraud.
In Harmeling v Harmeling (1978) 90 DLR (3d) 208 BCCA, the court declined a S. 6 order that would have forced a mother with young children out of their home.
In Mowat v Dudas 2012 BCSC 454, the court exercised its discretion to refuse an order for a forced sale of the 177 units condominium development that was owned by 135 individual owners. Some owners wanted the property sold, while others vigorously opposed same.
The court found that the sale would force many vulnerable people out of their homes, including young children, single parents, the elderly, the infirm and people with a very limited financial ability. Many could simply not afford a comparable property nearby would be forced to move far away.
In Lona Enterprises Ltd v. Eurocan 2018 BCSC 842, the disputing parties each held an undivided half interest in an apartment complex with 107 rental units. The application under the PPA was refused by the court on the basis that the respondent opposing partition had a written right of first refusal over any sale of the property that had not yet been complied with.
In Holman v Brooke 2022 BCSC 52, two friendly couples purchased a co-owned duplex with the intention that it would be their respective residences for the rest of their lives. The relationship turned extremely toxic after the death of each party’s spouse, and an application was made for partition and sale.
The court found that there was an ongoing mutual intention to treat each half of the duplex separately. The duplex was readily divisible into two lots making a forced sale of the entire property unnecessary. While describing the property as an idiosyncratic personal residence, the court did acknowledge that a long-term relationship between the parties, without more, is not a good reason for a sale.
CONCLUSION
The acquisition of property is the most expensive item that most parties will spend in their lifetime, and certain care should be applied before purchasing to see if the interests of the co-owners align. When purchasing property with non-spouses, it is highly recommended to enter into a lawyer-drawn agreement as to the various expectations and contributions to be made by the purchasers.
Most residential premises in Canada are jointly owned by married or common-law couples, so when property disputes arise relating to the sale of family assets, they are generally dealt with under the Divorce Act or applicable provincial family legislation.
However, as the costs of living rise, there are a significant number of parties that are not in a marriage like relationship that jointly own property that may require partition and sale proceedings in the future when a major disagreements on the sale of the property arise.
