One of the most important real estate cases of the year was released by the Ontario Court of Appeal this month.
It upsets the commonly-held interpretation of joint tenancy, a form of property ownership (not tenancy) which provides that on the death of one joint owner, the property automatically passes to the survivor.
Nigel Jackson and Bernie Taube were long-time romantic partners. Lori Rosenberg was the great-niece of Taube, who died in July 2010, and the sole beneficiary of both estates on the death of the second partner.
In 2011, Jackson purchased a property on Potts Lane in Port Hope as his home. He later transferred ownership of the home to himself and Rosenberg as joint owners (the law uses the term joint tenants) with right of survivorship.
The intention was that on his death, Rosenberg would automatically inherit the property without the delay and expense of a probate application.
In 2020, Rosenberg’s husband informed Jackson that they wanted him to move out so that they could upgrade the home, sell it and use the proceeds to buy a house for all three of them.
Jackson became concerned that he would be forced to move out. He visited a real estate lawyer and signed a deed to reverse the designation of joint tenancy and convert it to a tenancy in common, under which each of the parties would own 50 per cent of the property. Upon registration, Rosenberg’s right of survivorship automatically ended. But did she still own “her” half of the property?
In July 2023, the parties sued each other for clarification of their ownership rights following registration of the deed which terminated the joint tenancy.
Judge Robert Charney ruled that despite the registration of the first deed of a joint interest to Rosenberg, Jackson did not intend to gift half of the property to her during his lifetime. All he gifted her was the right of survivorship after his death, but no control or ownership rights of either half of the property during his lifetime.
In the meantime, Charney ruled, Rosenberg held “her” half interest in the property in trust for Jackson during his lifetime.
The decision meant that when Jackson severed the joint tenancy, he terminated Rosenberg’s half ownership and her right of survivorship for his own half interest which remained part of his estate.
Rosenberg’s appeal of the decision was heard by the Court of Appeal in April and its decision was released on December 4.
Writing for a three-judge panel, Justice Benjamin Zarnett dismissed Rosenberg’s appeal. In a huge surprise to many lawyers — including me — the court ruled that despite Rosenberg having a registered deed to half of the property, the effect of the 2020 deed was that she held her half interest in the property in trust for Mr. Jackson.
“No right of survivorship could attach to or flow from that interest.” She wound up with nothing.
Gosia Bawolska, counsel for Jackson, confirmed to me last week that Rosenberg wound up with nothing.
Property owners who have used joint ownership as an estate planning tool to avoid the cost and delay of probate will need to revisit their plans in light of this decision.
Image credit: iStock/Getty Image
Bob Aaron is Toronto real estate lawyer. His column appears on this blog, Move Smartly, and in The Toronto Star. You can follow Bob on Twitter @bobaaron2 and at his website aaron.ca.
December 18, 2024
Legal |