Court orders sale of co-owned home, leaves details for later

by | Mar 6, 2023 | Litigation, Property Disputes, Real Estate Disputes

Getting an order to sell a co-owned property is not as difficult as you would think.

Although recent interest rate hikes have taken the edge off Toronto’s notoriously wild housing market, prices are still high enough that co-ownership with family or friends remains an increasingly conventional choice for prospective buyers who see no other route onto the property ladder.

When co-owners fall out over a house, emotions run high and it’s often hard for them to agree on anything again. And while Ontario’s Partition Act provides a mechanism for the division and sale of a property, litigants (and their counsel) are often wary of pushing for a court-ordered sale until they have worked out some of the other details in dispute — such as the list price, the listing agent, or liability for outstanding property taxes and other bills associated with the home.

In Zappacosta v. Zappacosta, Ontario Superior Court Justice Paul Perell showed that parties don’t have to get bogged down in the weeds, ordering the sale of a home jointly owned by a father and son, while leaving it to an associate judge (formerly known as a master) to settle any remaining disagreements as they arise.

Facts of the case

The Seaton Village property at the heart of the dispute was purchased by the father “in trust” back in 2018, with the son registered on title as holding a 99 per cent interest compared with the father’s one-per-cent holding. There was no written agreement elaborating on the ownership split.

The property was the third in a sequence of purchases by the parents dating back to 2013, in which they bought homes inhabited by their son at the same time as the son was involved with the family’s main business in clothing retail.

In each case, the son obtained the mortgage, which was only possible because the father was registered on title.

By 2021, the family relationship had broken down, the son had left the retail business and both parties brought competing Partition Act applications seeking to have themselves declared the sole owner of the property.

 Judge orders even share

Noting that his discretion to refuse an application for partition and sale under the Partition Act is very limited, Justice Perell ordered the sale of the property at hand.

When it came to the co-ownership split, the judge rejected each side’s claim for 100 per cent beneficial ownership, concluding that the father and son’s history of property purchases constituted a kind of real estate enterprise:

“The son contributed his status as having a principal residence and by taking out a mortgage on each property. The parents contributed purchase monies that were, along with the growth in the equity of the property, rolled forward into the next transaction,” Justice Perell explained, granting both father and son a 50 per cent interest in the property joint venture.

Recognizing the possibility of further disagreement in the acrimonious matter, Justice Perell ordered that if the parties “cannot agree about the arrangements for a sale,” then the sale procedure shall be referred to an associate justice of the court.

In addition, the order provided for the proceeds of the sale to be paid into court, and any disagreement about the accounts of income, occupation rent, and expenses associated with the home based on a 50-50 ownership, “this accounting should be referred to the associate justice.”

Lessons for property owners

This decision shows that property owners who want to get out of a bad relationship with their co-owners should not see procedural details as a bar to the sale of the house.

And this potential streamlining of the partition-and-sale process is not only open to family members fighting over a residential property. In another case involving a fallout over the management of a co-owned 100-acre farm, Ontario Superior Court Justice Ryan Bell made a similar ruling, ordering the sale of the property under the Partition Act, before directing a reference to a master of the court  to “determine issues relating to the listing agent, the listing price, an accounting of the net proceeds, the disbursement of net proceeds and any other issue to be determined concerning the sale of the property.”

In addition, the Zappacosta case illustrates that registrations on title are not the final word on a co-ownership split. The judge in this case looked beyond the one-per-cent allocation to the father, to make his determination about what was really going on between him and his son.

Co-owners can reduce the risk of a dispute by detailing the specifics of their property ownership in a signed agreement drafted by a lawyer.

The case is also a warning to homebuyers who add another person to title solely for the purpose of obtaining a mortgage. In these arrangements, the majority owner often struggles with the idea that the minority party could force the sale of a home that they see as theirs, but this ignores the benefit they have received as a result of having a co-guarantor.