Who Should Be on Title to Your Home?

Whether buying property, beginning a new relationship, rearranging affairs after a marital breakdown, or in the context of estate planning, how title to your home, cottage or rental property is held should be a matter of careful consideration.

Title in One Name. It is common for multiple parties to contribute funds to a property but to have only one party hold title to it. Co-owners deciding to register real property in only one name should consider having in place an adequate agreement to govern their relationship, set out responsibilities and protect the interest of unregistered owners.A sole owner should keep in mind, simply registering title in your name alone does not in itself protect the property from others acquiring an interest. For example, when one spouse brings a home into a marriage, it can automatically become a “matrimonial home” with equal possessory rights for both spouses, regardless of who is on title. A cohabiting partner may also gain a “constructive trust” interest in the other partner’s home by contributing money or labour to its upkeep. Prior to cohabiting or marrying, a sole owner should consider a domestic agreement under the Family Law Act to clarify their new partner’s rights.

Title in Multiple Names. There are two main ways to share title: as “joint tenants” or “tenants in common”.  Joint tenants share an equal undivided ownership of the property. Generally the most important consideration for this form of ownership is the right of survivorship – the automatic transfer of a deceased’s interest to surviving joint tenant(s). So long as there remains a surviving joint tenant, the deceased’s share of ownership does not form part of his or her estate. Alternatively, the interest of a tenant in common owner devolves through his or her estate on death as opposed to automatically being transferred to the surviving owners. Tenants in common can own different proportions and can generally deal with their share as they please (subject always to contractual obligations, including mortgage terms). When holding title as tenants in common it is advisable to have a co-ownership agreement setting out, among other things, rules regarding the transfers of interest.

When considering title in more than one name, remember that each titleholder is an owner (unless holding title in trust) and therefore has rights attached to their interest, including a right under the Partition Act to seek an order that the property be sold.

Adding a Child to Title. Not infrequently, I am asked about adding an adult child to title for the purpose of estate planning. While the impetus is generally an attempt to abate or circumvent estate administration fees (probate taxes), there are significant considerations. Unintended consequences can include:

• loss of control over the property – your child will need to consent to transfers, mortgages, and other transactions;

•  the property becomes an asset of the child, meaning it could be attacked by creditors of the child; and

• a child’s share in the parent’s property can form part of the child’s estate in the event of a marital separation.

Additionally, there are capital gains, income tax and land transfer tax considerations.

Making a child joint tenant on your property as an estate planning tool can also fail if a court deems that a valid joint tenancy was not created or if the child fails to share the property or proceeds in accordance with your wishes after your death.

Adding a Parent to Title. Mortgage lenders often demand that young or first time borrowers add a parent to the mortgage and to title, to qualify for the loan.  It is important that all parties understand the legal and tax consequences of such an arrangement.

If the parent is going on title as a trustee only, adequate evidence of the trust must be established, such as through a formal trust agreement. In a trust situation, the mortgage lender may require a separate guarantee of the mortgage by the parent, and independent legal advice will likely be required. If the parent goes on title as a co-owner, the parent has a real interest in the property; which has associated tax and estate considerations.

In either case, the parent will be required to consent to all actions related to the property and some form of agreement between the parties is advisable. Finally, a parent’s liability for the mortgage is generally joint and several – meaning the bank can hold the parent responsible for 100% of the loan if the child defaults.

Holding Title in Trust or Through a Corporation. Another consideration is holding title to property through a corporation or via a trustee. There are various tax and estate planning purposes behind these methods of holding title, which are beyond the scope of this article and should be discussed with your accountant and lawyer.

For most of us, our real estate is our most important asset. Decisions about how to hold title to it should never be taken lightly. Work with your lawyer, accountant and realtor to ensure the method chosen works best for you and your family.

Alisha Johnson practices real estate, estate planning and business law at the law firm of Christie/Cummings in Collingwood. Please note that this article is only an overview and is not legal advice. Consult a lawyer before taking any action.