Our litigator, Micah Goldberg, explain how evolving case law impacts court-ordered property sales. Learn why securing immediate possession rights is essential.
In most cases, parties can sell a co-owned property provided they are registered as an owner with a 50% or greater interest. Recent and evolving case law is changing the approach to a court-ordered sales where a tenant lives on the property, and more generally, where the owner seeking the sale does not have the immediate right to possess the property. Before launching into litigation, co-owners should arrange their affairs to ensure that they have the legal right to immediate possession of at least a portion of the property.
Background
Broadly speaking, the Partition of Property Act, R.S.B.C. 1996, c. 347 governs the sale of jointly owned property in British Columbia. Among other things, the Act provides that a co-owner with a 50% or greater interest in the property has a prima facie right to sell. The other co-owner then needs to raise a "good reason" why the lands should not be sold. The judge is required to weigh these positions and do justice between the parties.
In Benias v Lee, 2021 BCSC 2312 one co-owner sought to force the sale of the jointly owned lands. The other co-owner resisted – on the basis that because the lands were tenanted pursuant to the Residential Tenancy Act, SBC 2002, c.78, there was no right for the property to be sold.
In analyzing that approach, the judge went through the history of the Partition of Property Act, specifically highlighting a line of cases that restricted the ability to seek partition to owners "with an immediate right to possess the property". Since the lease provided that the tenants had "exclusive possession of the rental unit" and restricted the co-owners' ability to visit the property, the court found that the co-owner did not have the right to immediately possess the property. Therefore, they lost their "standing" to bring proceedings under the Partition of Property Act. The petition was dismissed.
Following Benias, it appeared that tenanted properties could not be sold pursuant to the Partition of Property Act, at least not until the tenancies ended and owners regained their immediate right to possession. The result was seemingly bad for owners and tenants: for owners because they lost a significant property right – the right to sell – and for tenants because the decision incentivized owners to end existing leases, lest they undermine the owners' ability to sell their property.
Ironwood
The impact of tenancies on the Partition of Property Act was further clarified in Ironwood Owners Enterprises Ltd. v Elliots World, LLC, 2024 BCSC 340. In that case the petitioners owned interests in strata lots through a timeshare program – that interest allowed owners to occupy units for a certain time each year. The petitioners, 49/51 of the timeshare members, wanted to sell the entire property.
The two resisting owners said that they had exclusive rights to occupy for certain time periods and that two of the lots could not be sold. They resisted on the basis that the owners did not have standing since they did not have exclusive rights to their units – for several weeks of the year. Since the petitioners did not have an immediate right to possession, the resisting owners said that there was no standing to bring the proceedings, just like in Benias.
The Conflict and Path Forwards
Madam Justice Loo found something of a conflict between the reasoning in Benias and an earlier decision called Bourgeault v. Walton, [1998] B.C.J. No. 1957, 1998 CanLII 4611 (S.C.), where a judge found that the Partition of Property Act did not require the parties to maintain physical possession in order to have standing to compel the sale of a jointly owned property. The judge needed to decide whether an immediate right to physical possession was required, like in Benias, or not, like in Bourgeault.
After discussing the cases, she decided both cases could be right: each petitioner under the Partition of Property Act must have an immediate possessory right to some portion of the subject property, but each petitioner is not required to have an immediate possessory right to the entire property.
Madam Justice Loo concluded that the possessory rights of the parties applied temporally not spatially, meaning occupancy rights applied for various times of the year, rather than to certain parts of the building. Therefore, by time, the petitioners in Ironwood had possession of 49/51 units, far exceeding the 50% threshold.
Remaining Questions
Ironwood provides some clarity to co-owners seeking to sell a property, and confirms that provided an owner has immediate rights to occupy some part of a property, they have standing under the Partition of Property Act. If a property owner leases the entire property, the effect of Benias, seemingly confirmed in Ironwood, is that they lose standing under the Partition of Property Act until the lease ends.
However, Ironwood has left open some ambiguity about how much physical control over a property a co-owner must retain in order to rely on the Partition of Property Act to sell a property. For example, can a 50% co-owner rent out 99.9% of their interest, and retain standing as to their entire interest, or is that ability adjusted based on how much physical control the co-owner has following the lease?
Practically, following Ironwood co-owners might be encouraged to enter into leases where they retain some kind of right of immediate possession of a small fraction of the property, or to terminate a lease entirely under certain circumstances. More broadly, co-owners are well advised to be cautious about the terms of a lease and how they affect a co-owner's right to force the sale of a jointly owned property.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
