Joint tenancy

How BC law treats it

Joint tenancy is a type of co-ownership, not a lease, and has nothing to do with a commercial tenancy. Under Property Law Act s. 11, land transferred to two or more persons is held as tenants in common unless the transfer shows an intention to create a joint tenancy. In practice, the transfer and the title in the Land Title Register state that the owners hold as joint tenants. The defining feature is survivorship. On the death of a joint tenant, the survivors take the whole interest, and the deceased's share does not form part of the estate that passes under the will. A joint tenancy can be severed, for example by a transfer of one owner's interest or by agreement, which converts it into a tenancy in common. Survivorship does not avoid tax. Under Income Tax Act s. 70(5), a person is deemed to dispose of capital property at fair market value on death, so capital gains on non-principal residence property are taxed in the deceased's final return, subject to the spousal rollover. Joint tenancy may keep the passing interest out of the estate for BC probate fees. But where a parent adds an adult child to title without payment, the child is presumed to hold the interest on a resulting trust for the estate unless a gift is proved (Pecore v Pecore). Business owners usually hold investment property through a BC company or a bare trustee nominee company rather than in joint names; BC has no limited liability company.

What it means for your business

Joint tenancy suits spouses who want the survivor to take the property directly. It rarely suits business partners, because a deceased partner's share passes to the other partner rather than to the deceased's family. It can also create disputes when a parent adds a child to title for estate reasons. Getting the form of ownership right at purchase avoids litigation, unexpected tax and probate problems later. Example: Two unrelated investors buy a Richmond strata unit as joint tenants on a realtor's suggestion. When one dies unexpectedly, the survivor takes the whole unit, and the deceased's family receives nothing from it, an outcome a tenancy in common would have avoided.

Risks and common mistakes

Confusing joint tenancy with a lease or commercial tenancy. Using joint tenancy between business partners whose families should inherit their shares. Adding an adult child to title to avoid probate without documenting whether it is a gift. Assuming survivorship avoids capital gains tax on the deceased's share. Recommending a US style limited liability company to hold title, a structure that does not exist under BC law.