In an earlier article I discussed the importance of a written co-owners’ agreement when jointly purchasing recreational property. One of the most important sections of a co-owners’ agreement will cover how the parties can terminate the arrangement. Many people fail to enter into a formal agreement, however, and this can lead to a great deal of uncertainty when the relationship comes to an end. This uncertainty can then impact the co-owners’ relationship and often increases both the time and expense associated with formally ending the arrangement.
Usually, even without a co-owners’ agreement, the parties are able to agree on how to terminate the relationship and deal with the property and distribution of the sale proceeds (or transfer of title to one owner), although with some added cost because of the absence of a co-owners’ agreement.
In some cases, however, the relationship has broken down to such a degree (or the parties’ respective interests are so divergent) that a negotiated resolution is impossible. What does an owner do when the arrangement needs to end but an agreement cannot be reached? A solution is found in the Partition of Property Act (the “PPA”).
The PPA provides what is usually (although not always) a simplified process whereby one owner can petition the court seeking orders that will end the shared ownership arrangement. The court has the discretion under the PPA to craft an appropriate remedy, albeit subject to some limitations. Depending on the nature of the ownership and the nature of the property, the court may order the partition of the property into smaller lots (if possible under the applicable municipality’s bylaws), the sale of the property on the open market or the sale of one owner’s interest to another owner by way of private sale.
Although the proper remedy rests with the court, the precise exercise of that discretion will depend on the unique facts of any given case. Accordingly, a party bringing a PPA petition must ensure that they canvass the appropriate evidence in their material to support the remedy they wish the court to adopt. For example, a party asserting that there are special reasons why a sale is not the appropriate remedy (or at least a sale on the open market when anyone could purchase the property), should ensure that the petition materials go beyond bare statements by the owner as to why the property is unique.
Other issues may also require detailed evidence. If an owner is asking for an accounting and an uneven distribution of sale proceeds on the grounds they contributed more to the property, receipts and other evidence will be required to support this claim. If you currently jointly own property without a co-owners’ agreement, you may wish to ensure that your current record keeping anticipates the possible future need to rely on the PPA by confirming important conversations via email and keeping receipts for expenses that jointly benefit the owners.
Ultimately a petition under the PPA forces the parties to incur what can become significant legal expenses. Furthermore, like any court proceeding, the exact outcome cannot be guaranteed and the court’s chosen remedy may make both parties unhappy. Although the PPA allows for an orderly way to end joint property ownership, both the cost and uncertainty involved underlines the importance of entering into a written co-owners’ agreement where at all possible.