Partition of Property: Minority Interest

The Supreme Court has a discretion under the Partition of Property act to order a sale of a minority interest in co owned property.

The Supreme Court has a discretion under the Partition of Property act to order a  sale of a minority interest in co owned property.

Generally speaking, if a party owns 50% of property in co-ownership, and seeks the sale of the property, then, the court must order a sale unless there is good reason not to do so.

The Partition of Property act gives a broad discretion and allows the court to find remedies, which may contemplate sales to other parties, or valuations, or both.

In the situation where someone has less than a half interest in property, such as 25%, the party may still seek a court ordered sale of the property under the Partition of Property act, but the court in that situation has a far more broad discretion as to whether or not to order partition and sale.

In Haigh v. Kent 2016 BCSC 333, the plaintiff was the awarded a 25% beneficial interest in property on the basis of constructive trust as a remedy for unjust enrichment. The property was a 95 acre resort on beachfront property that had been owned by the family for several decades.

In previous litigation Haigh v. Kent 2012 BCSc 1361, the court found that the plaintiff had been unjustly enriched by his contributions of 20 years to the resort, and found a constructive trust in favour of the plaintiff was appropriate to the extent of a 25% ownership share in the property.
The property was found by the court to be valued at $1.65 million.

The property was rather unique and an order dividing such property into separate lots would be impractical and inequitable, so that an order for sale and distribution of proceeds would therefore seem to be view most appropriate remedy. However, such an order for sale would work serious hardship on the defendants who it had the property in the family for seven decades, and for generations.

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 Partition of Property act.

The court found that the plaintiff was entitled to be paid 25% of the fair market value of the property as a resort, but was not entitled to share in the profits from the resort business, but no deduction should be made in relation to insurance premiums, commercial mortgage on the property or mortgage payments.

During the partition and sale trial, the court found that since the defendants constructively held a 25% ownership share in trust for the plaintiff, the plaintiff was therefore entitled to the legal interest in the trust property, and not just the beneficial ownership as the defendants had argued.

The court therefore concluded that the plaintiff was entitled to an order vesting in him legal title to an undivided 25% interest in the property.

Section 8 of the Partition of Property act states as follows:

1) In a proceeding for partition where, if this act had not been passed, an order for partition might have been made, then, if any party interested in the property involved request the court to order a sale of the property in a distribution of the proceeds instead of a division of the property, the court may order a sale of the property, and give directions.

2) The court may not make an order under subsection 1, if the other parties interested in the property, or some of them, undertake to purchase the share of the party requesting the sale.

3) If an undertaking is given, the court may order of valuation of the share of the property requesting the sale in the manner the court thinks fit, and may give directions.

The court stressed that the words “may be compelled” under the Partition of Property act, are discretionary, and the onus is on the parties who do not wish to suffer partition or sale to demonstrate to the court that the interests of justice are such that the order for partition and sale should not be made.

The fact remains that the discretion is broad and unfettered, and will turn on whether justice requires that such an order not be made. (Bradwell v Scott 2000 BCCA 576 at paragraphs 26 – 30)

The court also referred to section 7 of the Partition of Property act, which contemplates a proceeding for partition where the court concludes that because of the nature of the property involved, or any other circumstance, a sale and distribution of the proceeds would be more beneficial than division. Then, if a party so requests, the court may order the sale of the property and the distribution of the proceeds notwithstanding the objection of any other party.

The court concluded that it was satisfied that in this case, that an order for the division of the property would be neither equitable nor practical due to it’s uniqueness, and therefore the plaintiff should have the right to a monetary buyout of his 25% interest in the property.

The court ordered that the plaintiff was entitled to an undivided 25% in the property that should vested him in fee simple, and on the basis of section 8 of the act, the defendants were directed to purchase the plaintiffs undivided 25% interest on the basis of the appraised value.

Occupational Rent – Competing Damages Between Co-Owners

Occupational Rent - Competing Damages Between Co-Owners

Ajayi v Oziegbe  2017 ONSC  2732 discussed the concept of occupational rent where one co owner occupies a jointly owned property to the exclusion of the co owner, and the co owner seeks damages for the use of the property and the occupying party seeks competing damages for the costs of carrying on the property such as maintenance and upkeep.

Occupation Rent and Carrying Costs

101      This brings me to Mr. Ajayi’s claim for occupation rent. The principles relating to occupation rent are set out in Erb v. Erb, 2003 CanLII 2112 (ON SC), where the Court stated at paras. 73 and 74:

In evaluating the claim for occupation rent, the jurisprudence establishes that a court has jurisdiction to grant occupation rent where it would be equitable and reasonable to do so. The court should look to a number of factors, including when the claim was first raised, the duration of the occupancy, as well as other circumstances existing between the parties: McColl v. McColl (1995), 12 R.F.L. (4th) 449; McKinlay v. McKinlay (1996), 22 R.F.L. (4th) 212. I subscribe to the observations of J.W. Quinn J. as set forth in paragraph 57 of Higgins v. Higgins, [2001] O.J. No. 3011. I think the case of Adams v. Adams (2001), 15 R.F.L. (5th) 1, relied upon by the defendant, to have little application to this case in that there the amounts paid by the husband were “prepayments” on the mortgage and were agreed by him to have been paid voluntarily for the family’s benefit. The expenses paid by the plaintiff in this case were not of that type or for that purpose.

I accept the defendant’s submission, supported as it is by remarks in Higgins, supra that as a basic proposition there should be an allowance for occupation rent if there is a claim for expenses during occupancy and prior to sale. The evaluation of those competing interests has to be decided based on all the circumstances in the case.

102      In resisting a claim for occupation rent, Ms. Oziegbe points to the decision of Horkins J. in B(J) v. M.(D.), 2014 ONSC 7410, where she states at para. 152:

The facts of this case do not support the respondent’s claim for occupancy rent. The respondent’s inability to use the matrimonial home arose from his criminal conduct when he assaulted the applicant. The applicant has been solely responsible for all of the household expenses since separation. It is not reasonable or equitable to award occupation rent given these facts. The request is denied.

103      When these decisions are reviewed, it is clear that the Court has the ability to consider the equities of the case in deciding whether to order occupation rent. The conduct of Mr. Ajayi in assaulting Ms. Oziegbe is a factor that supports denying Mr. Ajayi’s claim for occupation rent. However, I am of the view that this factor is outweighed by the factors in favour of granting occupation rent. These factors are:

a) The title to half the property should have been with Mr. Ajayi, and his equity has been tied up in the home, preventing him from investing it elsewhere.

b) Mr. Ajayi is responsible for the carrying costs for the home. As noted by Glithero J. in Erb, supra, where there is a claim for expenses there should be an allowance for occupation rent.

c) The delay in Mr. Ajayi obtaining his equity between September of 2015 and now is as a result of Ms. Oziegbe defending this case, and claiming that there was no resulting trust.

104      The parties have agreed on the amount that should be charged for occupation rent, and I have included that in my calculations in Appendix “1”. When the carrying costs are set off against the occupation rent, then Mr. Ajayi owes Ms. Oziegbe an adjustment of $5,773.44, which will be paid out of the proceeds from the house.

Property Partition and Sale Ordered for Joint Tenants

Property Partition and Sale Ordered for Joint Tenants

Bindley Estate v Quartermaine Holding Ltd. 2017 BCSC 672 ordered partition and sale of a property %50 owned by two parties where one party wished to sell and the other refused. They we unable to agree on a price for the respondent to buy out the petitioner’s interest. The petitioner estate wished to sell in order to wind up the estate of a deceased owner in a residential apartment .

The Court ordered a sale of the property pursuant to section 6 of the Partition of Property act.

Sections 2 and  6 of the act states: 

2 (1)  All joint tenants, tenants in common, coparceners, mortgagees or other creditors who have liens on, and all parties interested in any land may be compelled to partition or sell the land, or a part of it as provided in this Act.

6  In a proceeding for partition where, if this Act had not been passed, an order for partition might have been made, and if the party or parties interested, individually or collectively, to the extent of 1/2 or upwards in the property involved request the court to direct a sale of the property and a distribution of the proceeds instead of a division of the property, the court must, unless it sees good reason to the contrary, order a sale of the property and may give directions.

[27]        In McRae v. Seymour Village Management Inc., 2014 BCSC 714, a case involving a condominium development near Seymour Mountain in North Vancouver where 105 owners wanted to sell and 9 did not, Justice Fenlon stated at para. 20:

… [T]he Court, in exercising its discretion, is concerned with doing justice and must ultimately weigh the significance of the respondents’ reasons for objecting to the sale against the petitioners’ interest and reasons for wanting the [sale]. …

[28]        In the end, and as all the cases seem to agree, it is a matter of discretion under s. 6. In the exercise of the court’s discretion, the court must act judicially and fairly. One consideration will be whether an overriding fairness and similar result can be obtained by some other reasonable process: Richardson. v. McGuinness (13 December 1996), Vancouver Registry, C965381, (B.C.S.C.) at para. 34.

[38]        The court has a broad discretion to fashion a remedy that brings the parties’ dispute to an end in the fairest and most appropriate possible way. The respondent asks that if an order for sale is to be made, that I consider postponing it to allow for some tax planning and possible refinancing. The petitioner says that, given that this petition was filed some six months ago, the respondent has had sufficient time already.

[39]        I have considered the various options that may help a party solve this impasse. I find that the most appropriate remedy is to make the following orders:

a)     On or before June 9, 2017, and absent an agreement to the contrary, or absent any further court order, the parties will jointly appoint and engage an independent real estate broker (the “Broker”) to offer the Property for sale and obtain the highest price and most favourable terms (collectively called the “Sale Terms”) available on the open market. If the parties are unable to agree on the Broker to be engaged, the parties are at liberty to apply for an order in respect thereof.

b)     The respondent is at liberty to apply for an extension for the listing of the Property for sale past the June 9, 2017 deadline should the respondent consider it has appropriate grounds for an extension.

c)     Each of the parties may submit an offer to purchase the Property if either so wishes, provided that neither of them will act or omit to act in any way that affects the integrity of the sales process and the Broker’s mandate as set out in this order.

d)     Except as provided in subpara. (e) below, and subject to a right of first refusal, the Property will be sold pursuant to the sale terms, and upon completion of the sale, the net sale proceeds will be distributed equally between the parties.

e)     Instead of a sale of the Property, upon a determination of the sale terms, each of the parties may offer to purchase from the other that other’s 50 percent interest in the Property for an amount equal to the net amount that the vendor will receive if the Property is sold pursuant to the sale terms.

f)      If necessary, each party has liberty to apply to the court for directions with respect to the marketing of the Property or as to the conduct of sale on three days’ notice to the other if such directions are necessary.

g)     All necessary accounts, directions and inquiries may be taken, including a determination of net income owing to the parties, from the operation of Property, up to the date the sale of the Property completes.

h)     The parties have liberty to apply for the appointment of a trustee to conduct the sale of the Property and to distribute the net sale proceeds as the court directs.