Selling Jointly Held Property Under a Co-Ownership Agreement

The Dispute

Two people bought two residential properties together as an investment, with one registered on title to both and a written agreement setting out how they would share everything. Years later they fell out over the rent and the running costs, over a further agreement one said they had reached, and over a large mortgage payment the other had made alone. Neither would buy the other out and neither would sell, so the properties sat while costs accrued.

The Parties’ Positions

The co-owner on title sought a declaration that the written Property Ownership Agreement the two had signed in 2010 was the agreement in force between them. He also sought an accounting of the rent collected and the expenses paid on both properties, dissolution of the partnership under the Partnership Act, and orders allowing the properties to be sold and the net equity divided equally. His money claims included his share of the expenses carried on each property, full credit for a six-figure sum he had paid unilaterally against one mortgage, and a claim for lost opportunity.

The other co-owner counterclaimed for specific performance of a later instrument that the order names the 2018 Agreement. He claimed the cost of work he had performed on the second property, and additional monthly rental payments on the strata unit. His claim rested on a half interest in land registered in the other party’s name alone, and he sought a certificate of pending litigation, a registered notice that a claim affecting land is before the court, against each title. The competing instruments put a single question in issue between them, which was which of the two written agreements governed the partnership and its property.

The Court’s Decision

The Supreme Court of British Columbia declared the 2010 Property Ownership Agreement in force between the parties, and dismissed the counterclaim for specific performance of the 2018 Agreement. It dissolved the partnership under section 35 of the Partnership Act, which dissolves a partnership in the ways it sets out, subject to any agreement between the partners. He recovered his share of the expenses on both properties and full credit for a mortgage payment he had made alone, but was made responsible for a monthly rental amount on the strata unit. His lost opportunity claim was dismissed, and he was declared to hold both titles in trust as to an undivided one-half interest for each party, entitling the other co-owner to a certificate of pending litigation. Each side bore its own costs, and both properties were to be sold or bought out at half their equity, ending the deadlock.

Key Lessons for Co-Owners and Partners in Jointly Held Property

• Record in writing how the partnership ends, not only how it runs. Section 35 of the Partnership Act operates subject to any agreement between the partners, so the terms the partners themselves wrote can determine both when the partnership dissolves and how the accounts are settled afterwards.
• Do not assume a later agreement has replaced an earlier written one. The court declared the earlier written agreement in force and dismissed the claim for specific performance of the later instrument, so the earlier terms governed the accounting and the sale that followed.
• Do not treat registered title as a record of who owns the equity. The co-owner on title was declared to hold both properties in trust as to an undivided one-half interest for each party, which entitled the other to a certificate of pending litigation.
• Keep one running account of rents and expenses from the first day. The order required a further reconciliation of rents and expenses on both properties, with a hearing before the Registrar if the parties could not agree, which a single contemporaneous account can avoid.

The outcome of this matter turned on the written agreements between the parties and the evidence before the court at trial. A similar dispute between co-owners may resolve differently.

ATAC LAW represents co-owners, partners and investors in disputes over jointly held property, including the accounting, the dissolution and the sale that follow.

Mike C. Stewart acted for the co-owner on title at trial in the Supreme Court of British Columbia.