September 25, 2023
THE ISSUES
You are owed money by someone who owns a home in joint tenancy- how much can you collect from the sale of the home?
Or, on the other side, your spouse is a joint tenant with you and cannot pay their debts. Can their creditors seize your interest in the house?
What if the debtor’s spouse dies, and the creditor tries to collect against the house?
THE CASE
The Ontario Court of Appeal has clarified the answers after a Superior Court judge ruled that the husband’s creditors could not only claim against the husband’s equity interest but also could claim against the wife’s share.
The appeal overturned that decision and ruled in favour of the wife, allowing her to retain her half interest.
Most lawyers and judges would have said this was the right answer all along, but somewhat surprisingly, there was no prior Court of Appeal ruling on the question.
In Senthillmohan v. Senthillmohan, 2023 ONCA 280, the Court of Appeal examines the wording of the Executions Act, an Ontario statute that has nothing to do with capital punishment but lots to say (in a short statute) about how you collect debts. The Court emphasizes the key words in section 9 (1):
9(1) The sheriff to whom a writ of execution against lands is delivered for execution may seize and sell thereunder the lands of the execution debtor, including any lands whereof any other person is seized or possessed in trust for the execution debtor and including any interest of the execution debtor in lands held in joint tenancy. [Emphasis added]
And if the spouse has died? The Court says this about that:
Where property is jointly held and one joint tenant dies, the remaining joint tenant acquires the entire interest in the property through their right of survivorship. And, where a writ is filed against jointly held land before the debtor joint tenant’s death, it does not continue to bind the surviving non-debtor’s complete interest in the property acquired through their right of survivorship: Power v. Grace, [1932] O.R. 357 (Ont. C.A.). [Emphasis added]
Despite the existence of the 1932 case, I doubt many lawyers or judges would have known that before this recent decision.
The Court also ruled that the presumption of equal ownership applied and refused to allow the creditor to argue for an unequal division, saying: “The wife’s claim to the sale proceeds has nothing at all to do with equalization. Hers is a direct ownership claim”.
TAKEAWAYS
- If you are a lender, and the borrower or guarantor owns property in joint tenancy, you should try to get the other joint tenant to join in the borrowing.
- If not, selling the property through a sheriff’s sale will be very difficult.
- If the property is sold, your claim is limited.
- If you are a spouse of a debtor, you can maintain your right of survivorship through joint tenancy without risking your spouse’s creditors’ claims attaching to your share.
WHAT WEILERS LLP CAN DO TO HELP YOU
Our commercial law team can advise both lenders and borrowers on how best to protect their rights at the time credit is extended. We can also help negotiate the terms of borrowing.
If the debt goes for collection, our litigation team represents lenders, borrowers, and other parties, like spouses. None of us have been practicing for the entire 75-year history of the firm, but we have benefitted from the expertise and experience of our predecessors. At Weilers LLP, mentorship is not just a word; it is how we pass along our shared knowledge to benefit clients.
If you are involved in borrowing transactions or collection, especially in Thunder Bay or Northwestern Ontario, give us a call and see if Weilers LLP are the right lawyers for you.