I recently heard of something called the Partition Act. As I understand it, under this act, if three siblings jointly own a cottage, and one wants to get out but the others don’t have the money to buy him out, he could apply to the courts, and the place could be put up for sale. Is this true?
—NOT SOLD ON THE IDEA
Yes. Ontario’s Partition Act basically says that “anyone with an interest in land can apply to the court for a forced sale of the lands, or be forced by the court to sell his or her interest in the lands,” explains Peter Lillico, a lawyer with Lillico Bazuk Galloway Halka in Peterborough, Ont. “So, if there are three siblings sharing ownership of a cottage property, and one wants out while the other two want the status quo, it’s not ‘majority rules.’ ”
In a forced sale, a judge may decide the price, the terms of the sale, and how the proceeds are distributed. Other provinces have similar legislation, but with some provisions. Under B.C.’s Partition of Property Act, for example, the courts will not force a sale if the party opposing the sale can demonstrate “a good reason to the contrary,” says Gurinder Bains, an associate lawyer with Hart Legal in Victoria. Good reasons can include significant hardship on the opposing party—if the cottage is a co-owner’s only residence, and losing it would leave him without a home, say— or “maliciousness” on the part of the person who wants to sell. “The courts look at all the factors in the situation,” says Bains. “Does the co-owner who wants the sale have some other motive for selling? Are they trying to be vindictive? Did they just wake up one day and say, ‘I hate you, I want to sell,’ or did they give the others some warning? These things can make a difference.” (By the way, in B.C., if the co-owner who wants to sell has only a small share in the property—less than a one-half interest— “they will have a stronger burden of convincing the court to order a sale of the property,” says Bains.)
Happily, most cottage co-owners can avoid any court involvement by putting some kind of buyout strategy in their sharing agreement when they first draft it and using that strategy when the situation comes up. “Nobody expects to get divorced. Nobody expects to go bankrupt. Nobody expects to get MS and become unable to use the cottage,” says Lillico. “But the reality is, owners will need an exit strategy at some point.”
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