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Smith Valeriote Lawyers Blog | Smith Valeriote LLP Law Firm Guelph

The Partition Act in Action

Katal v Khurshid, 2017 ONSC 3412: the Partition Act in action.

Real property can be held by one or more owners, in the form of joint tenants or tenants in common. Real property co-ownership poses unique problems when co-owners disagree on decisions affecting their property; for example, selling a property to outside interests or separating from another co-owner. These conflicts can occur regardless of each party’s ownership stake. Situations have arisen where a minority co-owner, sometimes holding a 1% ownership stake, has attempted to block the sale of a property for personal reasons. The purpose of this article is to discuss the Partition Act and how it can be used to resolve disputes between co-owners of real property. “Partitioning” is a court order that separates a parcel of real property into two or more separate units or lots. The Partition Act  will be discussed in light of the recent case Katal v Khurshid, which involved a minority co-owner attempting to block the property’s sale. While Katal demonstrates using the Partition Act  in a matrimonial setting as it relates to a condominium, the Partition Act can also be applied to commercial real estate. 

Katal demonstrates the usefulness of the Partition Act to resolve co-owner disputes when only one party wants to sell the property. In this case, two parents lived in a home with their daughter and her son. The parents owned 99% of the property, while the daughter owned the remaining 1%. Conflict arose when the parents wanted to sell the property and move somewhere more accessible and affordable. The co-owner daughter wanted to continue occupying the property and refused consenting to its sale. Eventually, the parents brought a successful court application against their daughter to force the sale of the property

Lawyer for the parents cited the Partition Act for supporting the parent’s desire to sell the property. The Partition Act states that any party with an interest in real property may bring an application for the property’s partition and/or sale; conversely, parties may be required to submit to a partition or sale of their interest. 

The Judge in Katal looked to the previous case of  Davis v Davis, where it is states that co-owners have a prima facie right to partition [their property] if it is sought without vexation or oppression. This means that parties seeking partition do not have the burden of demonstrating why their land should be partitioned. Rather, parties against partition have the burden of demonstrating that the partition is vindictive and/or vexatious. In the absence of proof that a partition application was vindictive and/or vexatious, it will usually be granted; this means that co-owning parties are naturally entitled to force a partition, so long as it is sought in good-faith.

Courts realize that resolving disputes under the Partition Act will impact the rights of each co-owner- either through compelling partition or sale of the property. In order to resolve disputes with minimal interference to each co-owner’s rights, the court will try to partition land before ordering its sale. However, partitioning land may require consent from the municipality under the Planning Act. It is not always possible to receive consent for partitioning the property under the Planning Act; therefore co-owners should be prepared for a sale if consent is not received. 

Bottomline: Real property co-owners need to be prepared for potentially disagreeing on decisions affecting their property. Ultimately, co-owners should have an exit strategy for their investment in the event that the relationship between co-owners deteriorates or a co-owner longer wishes to be involved in the property. The Partition Act offers an after-the-fact solution for co-owners wishing to separate themselves from another co-owner. Furthermore, co-owners on the receiving side of a partition application need to understand the implications of being partitioned and the likelihood of the application’s success. Partition is more appropriate when it is used for physical land as opposed to a condominium; it is easier to partition land.

Parties considering a partition should be aware that the Partition Act is not to be used for transferring title. Under the Partition Act, the court does not have jurisdiction to transfer or change title. The Partition Act merely gives a co-owner the right to force a partition or sale.

Co-owners that wish to partition or sell their land should speak to a real estate lawyer. Similarly, co-owners on the receiving end of a partition application should be prepared to partition, sell, or demonstrate that the opposing co-owner is seeking the application on vexatious and/or vindictive grounds.

A copy of the Partition Act  can be found here

Katal v Khurshid, 2017 ONSC 3412

The content of this article is intended to provide a general guide to the subject matter and is not legal advice. Specialist advice should be sought regarding your specific circumstance.

Date:
2017.08.28

Services:
Real Estate Law

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