Taking “Title” to Property in Ontario: Distinguishing between Joint Tenants and Tenants in Common

By Ridhima Pathak

In Ontario, there are two ways in which you can take title to a property if you are purchasing with 2+ individuals as Joint Tenants or as Tenants in Common. As a real estate lawyer, I advise my clients on how these forms of ownership are structured, and which arrangement is best suited for them. Determining how title is to be taken can depend on several factors. Clients take into account the contribution to the purchase price, future estate planning, and any tax implications.

A Sole Owner is the only registered owner of a property. In the event of death, their interest automatically falls into their estate.

Joint Tenants is where two individuals have equal ownership to a property. The key principle here is the right of survivorship, which means that in the event of death, the property can be easily transferred to the surviving owner. The benefit of this is that the ownership does not fall into the estate, and in turn, you are not subject to any estate administration tax. Lastly, severing a joint tenancy is also permissible without the consent of the other individual on title. This generally arises when parties have a falling out or if there are family law related issues.

On the contrary, Tenants in Common is an arrangement that has no survivorship rights. This is where the interest in a property is divided between multiple individuals and you have the ability to assign different percentages of ownership between parties. In the event of death, the interest goes to the deceased’s estate, which must then be probated before their interest can be transferred to the named beneficiary under their Will. To further clarify, a percentage division can be 50/50, but it can also be unequal like 60/40 or 99/1. Another important characteristic is that each party can freely transact with their share as they please. For example, a party can mortgage out the interest or partition/sell their interest without the permission of others on title at fair market value. It is an equitable right, and also why we recommend parties taking title as tenants in common to enter into a co-ownership agreement, which would help define the responsibilities of each owner.

A key tax implication related to ownership is the first time home buyers rebate and land transfer tax. Land transfer tax is payable by purchasers when buying a home. The government offers a one-time refund to first time home buyers on land transfer tax if they are first time home buyers. This is referred to as the First-Time-Home-Buyer’s Rebate. In order to qualify for this rebate, a buyer must be a first-time home buyer i.e. cannot have owned property previously anywhere in the world, and that they will be living in this home as their primary residence.

There is a municipal rebate for buyers purchasing a home in the city of Toronto in the amount of $4,475 and a provincial rebate for buyers purchasing in Ontario in the amount of $4,000. This amount is reduced from the land transfer tax. Ideally, individuals would maximize their first-time home buyer rebate, but there are always exceptions to any rule. For example, if you are purchasing with a spouse that is not a first-time home buyer, then you are guilty by association and do not qualify for the rebate. Another common scenario is purchases by a parent and child, where the parent is not a first-time home buyer, but the child is, and they take title as 50/50. Then, the child can claim up to 50% of the first-time home buyer’s rebate only. Alternatively, if the parent took title at 1% and the child at 99%. Then, the child can claim up to 99% of the first-time home buyer’s rebate. It is important to note that each transaction must be assessed on a case-by-case basis.

Contact Ridhima Pathak at ridhima@sorbaralaw.com for more information on what title approach would be suitable for your purchase transaction.