Buying property in Toronto or anywhere in the Greater Toronto Area (GTA) is already a high-stakes financial undertaking. Whether you are eyeing a detached home in Etobicoke, a modern condo in the downtown core, or a multi-unit investment in Scarborough, the price of entry is significant. Yet, amidst the rush of mortgage approvals, home inspections, and land transfer tax calculations, many buyers overlook a foundational legal decision: how they will actually hold title.
Choosing between Joint Tenancy and Tenants in Common is not a mere administrative formality. It is a decision that quietly shapes your future taxes, estate planning, family security, and your level of risk in a legal dispute. Many buyers in Ontario rush through this choice on a closing call or a checkbox form without fully understanding the long-term consequences.
For some, the wrong choice only manifests years later in the form of a messy estate fight, a surprise creditor claim, or a co-owner who wants to sell the property when you do not. At Sarkaria Sethi LLP, we believe that with the right legal guidance at the start, you can structure your ownership to match your real-world goals and protect your hard-earned equity.
The Legal Foundation of Co-Ownership in Ontario
In Ontario, co-ownership is shaped by a combination of historical common law and modern statutes. When you purchase a home in the GTA, your lawyer doesn’t just “tick a box” for ownership type; they are helping set your legal and estate framework according to the following legislative pillars:
1. The Conveyancing and Law of Property Act
This is the primary legislation governing how land is transferred and held. Historically, it establishes that if the intention of the owners is unclear, the courts may presume a Tenancy in Common rather than a Joint Tenancy. This is a “safety net” to ensure that people do not accidentally lose their right to leave their property to their heirs.
2. The Land Registration Reform Act
This act governs how interests in land are recorded and recognized in the Ontario land registry system (Teraview). Whether you are a joint tenant or a tenant in common, your specific interest must be registered correctly to be enforceable against third parties.
3. The Succession Law Reform Act
This becomes highly relevant upon death. Joint Tenancy allows a property to bypass the probate process entirely through the “Right of Survivorship,” whereas a share held as a Tenant in Common forms part of the deceased’s estate and is distributed according to their Will or the laws of intestacy.
Understanding Joint Tenancy: The “Right of Survivorship”
Joint Tenancy is the most common form of ownership for married couples and long-term partners in Toronto. Its defining characteristic is the Right of Survivorship. This means that if one owner passes away, their interest in the property automatically transfers to the surviving owner(s) by operation of law. It does not pass through a Will.
The Four Unities
For a valid joint tenancy to exist in Ontario, the “Four Unities” must be strictly maintained. If any of these are broken, the joint tenancy is legally “severed” and becomes a tenancy in common:
- Unity of Possession: Each joint tenant has an undivided right to possess the whole property. You cannot fence off “your half” of the living room.
- Unity of Interest: Each owner must have the exact same legal interest. For example, two owners must each own a 50% interest; you cannot have a joint tenancy where one person owns 70% and the other 30%.
- Unity of Title: All owners must have acquired their interest through the same deed or transfer document.
- Unity of Time: The interests of all joint tenants must vest (begin) at the same time.
Advantages and Risks
The primary advantage of Joint Tenancy is the avoidance of Probate Fees (officially known in Ontario as the Estate Administration Tax). Because the property transfers automatically, it is not considered part of the deceased’s estate for probate purposes, saving the survivors roughly 1.5% of the property’s value in taxes.
However, the risk is a lack of control. If you are in a second marriage and wish for your share of the home to go to your children from a previous relationship, Joint Tenancy will prevent that—the property will go entirely to your spouse instead.
Understanding Tenants in Common: Flexibility and Control
Tenants in Common is often the preferred choice for business partners, friends buying together, or “blended” families. Unlike Joint Tenancy, there is no right of survivorship. Each owner holds a distinct, transferable share of the property.
Distinct Shares
One of the greatest benefits of this structure is the ability to reflect unequal financial contributions. If one person provides 80% of the down payment for a condo in North York and the other provides 20%, they can register their ownership as an 80/20 split. This ensures that if the property is sold, the proceeds are distributed fairly based on the registered percentage.
Estate Planning
When a Tenant in Common dies, their share goes to their estate. This allows the individual to name specific beneficiaries in their Will. While this share will be subject to probate fees, it offers the ultimate level of control over where your wealth goes after you pass away.
Financial Implications: Taxes and “Hidden” Costs in the GTA
While the choice of ownership doesn’t change the immediate Toronto Land Transfer Tax (LTT) or Municipal Land Transfer Tax (MLTT) at the time of purchase, it has significant long-term financial consequences.
Capital Gains Allocation
For investment properties, the CRA generally looks at the legal title to determine who is responsible for capital gains tax. If you are Tenants in Common with a 70/30 split, the tax burden on the appreciation of the property is generally split in that same ratio. In a Joint Tenancy, the CRA usually assumes a 50/50 split.
Creditor Exposure
This is a critical consideration for business owners or those with high personal debt. In a Tenancy in Common, if one owner is sued or goes bankrupt, the creditor can generally only place a lien or claim against that specific owner’s share. In a Joint Tenancy, the entire property can sometimes become entangled in legal proceedings, making it much more difficult for the “innocent” owner to refinance or sell.
The “Hidden” Cost of Disputes
If co-owners cannot agree on whether to sell a property, Ontario law allows for a “Partition and Sale” application. This is a court process where a judge orders the house to be sold so the owners can go their separate ways. This process is significantly more complicated and expensive when the ownership structure was poorly defined at the start.
A Tale of Two Owners: The Importance of Structure
Consider the hypothetical case of “Amir and Daniel,” two friends who bought a Scarborough duplex. Amir contributed $200,000 to the down payment, while Daniel contributed $50,000. To “keep things simple,” they registered as Joint Tenants (50/50).
Two years later, Daniel’s business failed, and creditors sought to recover funds. Because the property was held in Joint Tenancy, the legal process of separating Daniel’s debt from Amir’s equity became a nightmare. Furthermore, when Daniel tragically passed away in a car accident, his 50% “interest” automatically went to Amir because of the Right of Survivorship. Daniel’s young children and widow received nothing from the duplex, despite Daniel’s initial $50,000 investment.
Had they consulted with Sarkaria Sethi LLP at the outset, we would have recommended a Tenancy in Common with a 80/20 split and a separate co-ownership agreement. This would have protected Amir from Daniel’s creditors and ensured Daniel’s family inherited his share.
The First-Time Buyer’s Strategy
First-time buyers in Toronto face unique challenges. Often, they require a “gift” from parents or need a parent to go on the title as a guarantor to qualify for a mortgage.
If a parent is added to the title “just for the mortgage,” choosing Joint Tenancy can be a massive mistake. It could accidentally disinherit the buyer’s siblings if the parent passes away, as the parent’s “share” would go entirely to the child on the title.
At Sarkaria Sethi LLP, we often assist families in these situations by drafting Bare Trust Agreements. This allows the parent to be on the title for the bank’s purposes while legally acknowledging that the child is the 100% “beneficial” owner. This protects the family from unintended tax and estate consequences.
The Closing Logistics Timeline
Deciding how to hold title is not something that should be done an hour before you sign your papers. Here is a typical timeline for a GTA purchase:
2–3 Weeks Before Closing: Your lawyer at Sarkaria Sethi LLP will review your Agreement of Purchase and Sale. This is the time to discuss your family structure, financial contributions, and estate goals. We will help you choose between Joint Tenancy and Tenants in Common.
1 Week Before Closing: Your mortgage instructions arrive from the lender. It is vital that the ownership structure on the mortgage matches the structure on the title. Any discrepancy here can cause a lender to “pull” the funds, delaying your closing.
Closing Day: Your lawyer registers the transfer electronically. The document will explicitly state whether you are holding the land as “Joint Tenants” or “Tenants in Common.” Once registered, this is a public record.
Common Industry Red Flags to Watch For
When purchasing in a high-priced market like Toronto, watch out for these “danger zones” regarding your title:
- Adding someone “just for help”: Never add a friend or relative to a title without a written agreement explaining what happens if you want to sell.
- Verbal side-agreements: The “handshake deal” regarding who owns what percentage is almost impossible to prove in an Ontario court if it contradicts what is written on the registered deed.
- Blended families: If you have children from a previous marriage, defaulting to Joint Tenancy is often a disservice to your heirs.
- Co-owners with high-risk jobs: If your co-owner is a sole proprietor in a high-liability industry, Tenancy in Common is often the safer shield for your own equity.
Frequently Asked Questions
1. Does Joint Tenancy completely avoid probate?
In many cases, yes, for that specific asset. However, if both joint tenants die at the same time (e.g., in a common accident), the property will still fall into the estate and be subject to probate.
2. Can I sell my share if I am a Tenant in Common?
Technically, yes. You can sell your 30% share to a third party. However, finding a buyer for “30% of a house” is nearly impossible. This is why a Co-ownership Agreement is essential to dictate how buy-outs work.
3. What happens if we divorce?
In Ontario, the Family Law Act governs the “matrimonial home.” Even if you are Tenants in Common with a 90/10 split, if the house is the matrimonial home, both spouses usually have an equal right to the value of the home upon separation, regardless of how the title is held.
4. Is legal advice really necessary for this?
Given that the average price of a home in the GTA is over $1 million, a “small” mistake in title structure can result in tens of thousands of dollars in unnecessary taxes or hundreds of thousands in lost inheritance. Professional legal advice is an investment in your protection.
Get It Right from Day One
With Toronto and GTA home values continuing to represent the bulk of most residents’ net worth, title structure is not a minor detail—it is the core of your financial planning. Whether you are a first-time buyer in Vaughan or a seasoned investor in Mississauga, how you hold title will dictate your legal rights for decades to manner.
Sarkaria Sethi LLP brings a wealth of experience in Ontario real estate law. We don’t just process transactions; we help buyers structure their ownership wisely to ensure their families are protected and their closings are smooth.
