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Many couples own shared assets, and it is not uncommon for couples to hold tenanted investment properties together. When a relationship ends, the division of these shared assets becomes necessary and may require that the shared assets be sold to divide the proceeds. When the shared asset is tenanted and those who own the shared asset do not have an agreement about how the asset is to be managed and divided, co-owners may turn to the courts to compel sale of the property. In these cases the courts rely on both the BC Partition of Property Act 1996 and the Residential Tenancy Act 2002, and the results may not be satisfactory to the co-owners of the property. This issue was recently considered by the BC Supreme Court in Benias v Lee (2021).
The case highlights the importance of being proactive and drafting an agreement to govern how jointly owned assets are to be managed or divided should the need arise. Carefully considering and agreeing in writing what should happen with any jointly owned assets can help co-owners to avoid costly legal fees and delays in resolving the conflict.
The plaintiff and her partner lived together for five years, and the courts considered this a marriage-like relationship for the purposes of the Partition of Property Act. They had registered themselves as joint tenants in their property in Vancouver, and began renting it out to tenants for additional income after living in it together for a period of time. The plaintiff contributed significantly more to the purchase price of the home than the defendant had, and they shared the costs of the remaining mortgage on the home equally. The plaintiff expressed verbally and in writing to the ex-partner that they wanted to sell the house in order to have the proceeds fairly divided. The ex-partner (the defendant) refused to buy out the plaintiff’s share of the property and as a result, they were unable to agree to a fair division of the asset. As a result, the plaintiff turned to the courts, seeking remedy by compelling the sale of the shared property. During the dispute, the property was tenanted under a standard lease agreement.
The court rejected the request for an order for the sale of the property on the grounds that the plaintiff did not have standing to raise the claim. The judge examined both the Partition of Property Act 1996 and the Residential Tenancy Act 2002 in coming to this conclusion. According to the Partition of Property Act, a co-owner needs to have immediate right of possession of the land to bring court action and potentially compel sale of the property. Then, the judge looked to the Residential Tenancy Act to determine if the co-owner had immediate right of possession. The Residential Tenancy Act stipulates the circumstances under which a landlord can terminate a tenancy. Under the Residential Tenancy Act, there are a very limited number of exceptions that allow early termination of a tenancy.
As a result of the ongoing tenancy, the claimant was not found to have an immediate right of possession to the property. The court found the claimant did not have standing to petition for an order of sale, and was unable to provide a remedy to the plaintiff.
This case demonstrates one of the many legal complications that arise when couples hold shared assets and haven’t drafted an agreement on how to manage the properties in the event of separation.
An unmarried couple in a marriage-like relationship (sometimes referred to as common law marriage), should consider drafting a relationship agreement or cohabitation agreement, or an agreement specific to shared high-value assets, like an investment property. Having an agreement prepared beforehand can provide certainty and peace of mind during a difficult period of transition, guiding the management and division of shared assets in a way that both parties agree is reasonable and fair. While discussing the possibility of division of shared assets can be uncomfortable and feel unnecessary, it is an important step to ensure your interests are protected.
For couples already separated or in the process of separation that share assets but didn’t draft an agreement like a prenuptial or cohabitation agreement, it is important to act quickly. There are alternative routes to remedy available for couples through The Family Law Act 2011, although there is a limitation period of 2 years for claims.
If you have concerns about a shared asset with a partner or ex-partner, contact an experienced lawyer today.