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Richards + Company provides legal services to individuals and businesses in Edmonton and throughout Alberta. We actually have clients from all of western Canada. Our areas of focus and expertise include Real Estate (Residential and Commercial); Corporate (e.g. incorporations, amalgamations, acquisitions, etc); Commercial (bank financing, land development, business purchases, limited partnerships); and Wills & Estates.

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Land Ownership - a Primer

May 1, 2017

The man who says he is willing to meet you halfway is usually a poor judge of distance. ~Author Unknown

 

 

When more than one person wishes to own land, there are several options available. In previous blogs we addressed the fact that the individuals could incorporate, form a partnership or enter into a joint venture arrangement. 

 

But there is another, more elemental layer to this: if more than one party (individual or corporation) is to appear on title to the property being acquired, it is important to understand there are two types of ownership interests available with respect to registration of title. 

 

Jointly:

this is the default and most common form of ownership. Essentially, all joint owners of the property own all aspects or rights of the entire title.

 

Let me quickly digress for a moment. Essentially, there are three title ownership categories that we inherited from English law. Fee simple, the most absolute form of ownership we have here in Canada. But note that such title is not actually absolute. It’s subject to restrictions and reservations on behalf of the crown (or different levels of government). These reservations could be expropriation rights, mines and minerals, taxation and so forth. So we really hold title at the will of the government in some sense. The other ownership interests are a life estate (where one holds title only during one’s lifetime) and a leasehold interest (where one holds title only for a specific period of time). If you purchase land in Banff National Park for example, you are likely only purchasing a leasehold interest in that land.

 

Ok - so back to the topic at hand: You can own any of these interests ‘jointly’. And if you do, then what comes along with that is the right of survivorship. If one joint owners dies, the other joint owner(s) automatically take over interest in the property. It never enters the estate of the deceased, and no beneficiary of the deceased would have an interest. This is significant to investors. If two business partners buy a house in Vancouver, own title jointly, and one dies, the other guy gets it all - title would be transmitted into the survivor’s name alone. That is not likely the intent in business arrangements (but specifically may be the intent where a husband and wife buy a house together). So be careful how your lawyer describes you on title - the question is not a throw-away. It has implications.

 

Tenants-in-Common:

the other way to hold title is quite different - unlike joint ownership, tenants-in-common ownership does not carry the right of survivorship. Owners in fact hold a specific percentage of the total. So, if a party dies and she owns an ‘undivided 50% interest’ in the property, her 50% ownership interest will pass to whoever she has indicated in her will. This has implications in investment situations as well. Is it the intent that the survivor has to deal with the deceased’s sixth cousin twice removed? Or the deceased’s spouse? That could happen. We usually recommend some sort of joint venture agreement that addresses the certainty of death (and taxes too). And where there is a good joint venture agreement, there should be a corresponding registration against title on behalf of whoever holds beneficial interest in the property so that anybody that may inherit title would take subject to that beneficial interest. And it may trigger a contractual obligation that requires the estate of the deceased to offer its interest for sale to the survivor. 

 

So whenever you have two or more parties that are to have an interest in land, it is imperative to  have title registered correctly so it corresponds to your business goals. Talk to your lawyer about this and don’t take it for granted that he or she will bring the topic up. 

 

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