Severing Joint Tenancy Through a Course of Dealing


Joint tenancy is one method by which two or more persons may hold land or other property. The unique feature of holding property as joint tenants is that when one of the owners dies, his or her interest passes to the surviving owner (or owners) by right of survivorship. While joint tenancy is often desirable for estate planning purposes, there may be situations in which a joint owner would be better off to hold an undivided interest which can be left to the beneficiaries of his or her estate by will. Converting a joint tenancy to an undivided interest as tenants in common is referred to as severing the joint tenancy.

A joint tenancy may be severed at the option of either joint tenant, or by mutual agreement. Typically, this is effected by one of the joint tenants transferring his or her share in the property to him or herself. However, that is not the only way that joint tenancy can be severed. The Courts have long recognized that joint tenancy can be severed through a “course of dealing” which indicates the parties’ intention to mutually treat their interests in the property as a tenancy in common.

The Ontario Court of Appeal recently considered whether the acts of a couple who separated not long before the husband’s death constituted a course of dealing which severed their joint tenancy in their home. In Hansen Estate v. Hansen, the couple, Mr. and Mrs. Hansen, married in 1983. Both had children from previous relationships. In 2003, they bought the subject property and held it as joint tenants. In 2001, Mr. Hansen’s health declined and he thereafter required a great deal of support from Mrs. Hansen. She too suffered health problems a few years later. Their relationship became strained and in March 2010, Mrs. Hansen moved out of the couple’s home. Shortly thereafter, Mr. Hansen retained legal counsel to advise him with respect to the breakdown of his marriage and to prepare a new Will for him. That new Will left everything to his daughters and left nothing to Mrs. Hansen. Mrs. Hansen also retained counsel who then sent a letter to Mr. Hansen’s lawyer, indicating a desire to negotiate a separation agreement and division of property. In that letter, Mrs. Hansen’s lawyer also noted that she was content to let him remain in the home so long as he bought out her interest in the property, failing which the house would be sold.

After moving out of the house, the Hansens began closing their joint bank accounts and transferring the funds to accounts in their own names. The utility bills for the home were changed from Mrs. Hansen’s name to Mr. Hansen’s. They also prepared financial statements for exchange in furtherance of their settlement negotiations.

However, before a settlement could be finalized, Mr. Hansen died. Mrs. Hansen then asserted a right of survivorship in the home, taking the position that as joint tenant she was entitled to the entirety of the property. In response, the executors of Mr. Hansen’s estate applied to the Court for a declaration that Mrs. Hansen was entitled only to an undivided one-half interest in the property.

At trial, Mrs. Hansen was successful. The trial judge reviewed the three ways of severing a joint tenancy: 1) by a person acting on his/her own share (i.e. transferring their interest to themselves as tenant in common), 2) by mutual agreement, or 3) by a course of dealing which indicated that the parties intended the property to be held as tenants in common. The trial judge found that none of these applied and thus the joint tenancy was not severed. Mr. Hansen’s executors appealed.

The Court of Appeal first reviewed both the methods for severing a joint tenancy (as identified by the trial judge), as well as a number of Canadian cases on the course of dealing test in the context of a marriage breakdown. In that discussion, a few key points were made by the Court with respect to the application of the course of dealing test in Ontario:

  • severance by course of dealing does not require proof of an explicit intention to sever the joint tenancy – the mutual intention can be inferred from the course of dealing between the parties and does not require evidence of agreement;
  • severance by course of dealing does require that each owner knew of the other’s position and that both treated their interests in the property as no longer being held jointly – this can be inferred from communications or conduct;
  • the determination is an inherently fact-specific assessment; and
  • the purpose of severance by course of dealing is to ensure that one owner does not unfairly obtain the benefit of the right of survivorship where the parties have shown a common intention to no longer treat their interests in the property as an indivisible, unified whole.

The Court of Appeal, however, identified a disagreement between decisions of the Ontario Courts and decisions of the British Columbia Courts on the framing of the course of dealing test. They noted that the Courts of British Columbia, beginning with the 1993 B.C. Court of Appeal decision in Tompkins Estate v. Tompkins, have taken the view that in order to satisfy the test, one party must detrimentally rely on the other’s representation that he or she no longer wants to hold the property jointly. In other words, the party asserting the severance must prove not only that both parties treated their interests as separate, but also that they relied on the other party’s representations or actions so that it would now be unjust for the other party to assert a joint tenancy. The Ontario Court of Appeal held that such detrimental reliance was not necessary and that the test could be satisfied simply by virtue of each party being aware of the other’s intentions and both parties treating their interests in the property as no longer being held jointly.

Going back to the facts of this particular case, the Ontario Court of Appeal concluded that Mr. and Mrs. Hansen had engaged in a course of conduct that involved separating their lives and dividing their assets. While the terms of their separation were not yet agreed upon at the time of Mr. Hansen’s death, it was clear from the correspondence between their respective lawyers that the couple intended to divide their assets between them and continue to hold none of them jointly.

At this point, it remains to be seen whether our Courts in British Columbia will follow the Ontario Court of Appeal’s decision in this case or continue to follow the Tompkins decision. However, this case does provide a very clear illustration of the type of evidence that may be relevant in determining whether joint tenancy has been severed by a course of dealing. Such facts include:

  • one party vacating the property;
  • the expression of an intention to negotiate a division of property, including the subject property;
  • the intention to appraise the property for the purposes of negotiation;
  • the requirement that one party buy the other party’s interest as a condition of continuing to reside in the property;
  • the expression of an intention to litigate the division of property if a resolution is not obtained;
  • the drafting of a new Will which disposes of the party’s interest in the property; and
  • closing of joint bank accounts and opening of separate accounts.

Each case, as the Ontario Court of Appeal indicated, is very fact specific so it is important that legal advice be obtained before determinations are made as to whether or not a joint tenancy has in fact been severed by a course of dealing.