When you own a property in Canada, you don’t always own it on your own. If you share ownership rights of your property or land with one or more people, you will hold what is known as a “Tenancy in Common” arrangement. But what exactly does this mean for each party involved? We’ll take a deeper look at Tenants in Common arrangements in Canada. Let’s get to it!
What is Tenants in Common?
As mentioned above, a Tenancy in Common agreement is when two or more people share rights to a parcel of land or piece of property. The number of owners does not matter.
Tenants in Common applies to as little as two people who share a property, or to as many as 100 or more who share a property. Ownership can be over residential or commercial properties.
When you enter into a Tenants in Common agreement, the property can be divided however you like. You may decide to divide the property equally among yourselves, or one person may control a larger percentage of the property than others. This will all be outlined and detailed within the legal ownership documents such as the deed or title.
What is the difference between Tenants in Common and Jointly held property?
Many people often confuse Tenants in Common with Jointly held property, but these are two distinct entities. The main difference between the two is what happens in the event of the death of a tenant.
If a tenant of a Tenant in Common agreement passes away, their share of the property is passed on to whoever is listed in their will. If a tenant of the Jointly held property passes away, their portion of the property is equally distributed among surviving owners.
Let’s say, for example, that Jack and Diane have a Tenant in Common agreement wherein Jack owns 50% and Diane owns 50%. Jack passes away. In this case, Jack may pass his 50% of shares onto his surviving cousin, Vinny.
Now let’s say Jack and Diane are married and they have an agreement for a Jointly Held Property (at 50% each). Jack passes away. In this case, Diane takes on Jack’s ownership and now owns 100% of the property.
What if I no longer want to be Tenants in Common?
If one party decides that they no longer want to be a Tenant in common, it is up to the shareholders to come to a mutual decision as to how to proceed.
One or more shareholders may decide to buy out the tenant that wishes to leave, or all shareholders may agree to sell the property and split the profits. If a common decision cannot be made, a partition action can be held and the matter can be decided in court.
You can learn more about dissolving Tenants in Common agreements here.
How do taxes work for Tenants in Common?
If you share a property with one or more people, you still have to pay taxes. In the eyes of the law, it’s important to note that a Tenant in Common property is not considered subdivided.
In other words, the property is still seen as a single unit – not a divided one. In return, taxes will not usually be divided among property owners. Rather, every owner of the property is responsible for the taxable amount. How the amount is paid and collected is to be decided amongst the tenants themselves.
In order to avoid conflict, your Tenancy in Common agreement should be drawn up beforehand to clearly state the responsibilities of each owner when it comes to taxes.