Tip: Joint title has financial implications

People have a tendency to put the title to their house in JOINT names with their spouse or common law partner, without understanding the legal implications (this arrangement is called a JOINT TENANCY). I don't really know why people do this because there is another option called TENANTS IN COMMON. (I know that we think of a 'tenant' as a renter, but these are the correct terms for the two most common ways in which houses are owned by more than one person in Alberta).

Owning property as TENANTS IN COMMON is underused and most people have not heard of it. TENANTS IN COMMON must specify the percentage of ownership each owner has: 50/50, 27/75 or even 1/99. If the property is sold or one owner dies and the estate needs a payment, the value is divided as per the percentage of ownership. Simple and clear.

The rules are much murkier for JOINT TENANTS. Here is a quick overview which is intended to alert you to the issues and not to make you a lawyer:

1. 'The survivor takes all' in a joint tenancy. If one joint tenant dies, the other joint tenant gets 100% of the house.
2. If you are married, the Matrimonial Property Act (MPA) applies a 'presumption of advancement' to exempt money put into an asset owned as JOINT TENANTS. This is hard to explain, because to understand this point, you need to know that some categories of property under the MPA are exempt from division between spouses. The 'presumption of advancement' means that if a husband/wife puts exempt money into a house owned as JOINT TENANTS, 25% of the exempt property will have to be shared with the other spouse if they separate. In contrast, if that exempt money were put into a house in one party's sole name or in a house owned as TENANTS IN COMMON, this presumption would not operate. The 'presumption of advancement' presumes that when you put your exempt money into something owned JOINTLY that you intended to share a portion of that money. Example, wife deposits $60,000 of her pre-marital savings towards the purchase of a $200,000 house. She puts the husband on title as a JOINT TENANT. They separate later. The law 'presumes' she intented to 'advance' 25% of the deposit to her Husband when she put the title into JOINT names. This presumption can be successfully challenged if you can show that you explicitly agreed to waive it.
3. If you are common law, the Law of Property Act (LPA) governs. It is not very helpful. The LPA does NOT say that joint means a presumption of equal division. It says that if you and the other owner cannot agree on the division of your JOINTLY owned property, you can apply to court to have the division determined. And, if you actually applied to court for such a division, a complicated trust law analysis should be applied to determine each party's share of ownership upon a separation. That trust law analysis goes something like this:
a. there is no presumption of advancement against the deposit;
b. there is an argument for a RESULTING TRUST. Under a Resulting Trust, it is presumed to be unlikely that an unmarried person would intend to give their deposit and the house they bought with the deposit in whole or in part to the other JOINT TENANT, accordingly the other joint tenant has the onus of showing that there was an intention to gift a share of the deposit. Example: boyfriend puts the entire deposit of $60,000 into buying a $200,000 house and puts girlfriend on title as a JOINT TENANT. House increases in value to $220,000 and the parties split up. Girlfriend says joint means equal and wants half. Boyfriend says 'no' I put you on title because I needed another name to get a mortgage, I never intended that you would actually own half. A technical application of the law would say that the girlfriend has to provide evidence to show that the boyfriend actually intended to give her half of the value of the house and his deposit; or
c. There is an argument for a CONSTRUCTIVE TRUST, in which the girlfriend can argue that the boyfriend must give her a share of the value, otherwise he will be unjustly enriched by her other monetary contributions, labour or a combination of money and labour, notwithstanding no initial contribution.

I cannot make this less complicated -- it really is messy and complicated. My primary goal is to alert you to the fact that 'JOINT TENANCY' has a deviously complex meaning and advice should be sought before you sign off on this arrangement.

To help you issue spot, consider the following:

a. If you are married and deposit different amounts to the purchase of a house and then call it joint, you risk not getting 100% of your share of the deposit returned;
b. If you are not married and deposit different amounts to the purchase of a house in joint tenants, it is not clear how the deposit or the increase in value will be divided;
c. In both cases, selling the property will require consent from the other owner;
d. Joint causes confusing because it sounds like it means equal;
e.It leads to a right of survivorship on death;
f. It complicates things and may tie up your assets long after the relationship ends.

I am trying to be careful to point out legal issues in this blog and not to give legal advice (that would be dangerous and could run afowl of my 'always get legal advice' tip.)

The point here is that joint title carries different implications depending on whether you are married, not married or on death. Ask a lawyer to explain further and then find a way to own your property that best suits your situation.