Severing a joint tenancy into tenants in common in Canada does not trigger an immediate capital gains tax liability, provided your beneficial ownership percentage remains exactly the same. You update the title at your provincial land registry office, and real estate lawyer fees usually range from $500 to $1,500 CAD.
When multiple people purchase real estate in Canada, they typically hold the property in one of two ways: as joint tenants or as tenants in common 🔒. Joint tenancy includes a powerful legal feature known as the “right of survivorship.” This means if one owner passes away, their share automatically transfers to the surviving owner, completely bypassing their estate and their Last Will and Testament. While this is fantastic for married couples avoiding probate fees, it can create massive estate planning nightmares for siblings, blended families, or business partners.
To regain control over who inherits their share of a property, co-owners often choose to dissolve (or “sever”) the joint tenancy and convert it into a tenants in common arrangement . As a tenant in common, you own a distinct fractional share of the property that you can leave to anyone in your will. Many Canadians worry that altering the land title will alert the Canada Revenue Agency (CRA) and trigger a massive capital gains tax bill. Fortunately, if structured correctly, this administrative change is completely tax-neutral.
Step-by-Step Process to Sever a Joint Tenancy in Canada
Whether you own a family cottage in Ontario, a condo in British Columbia, or a duplex in Nova Scotia, the process of changing your title structure generally follows these legal steps 📍. It involves municipal land registries and careful estate planning.
Step 1: Reviewing the Current Land Title
Before taking any action, you must pull the current deed or parcel register from your local land title office to confirm you are actually registered as joint tenants. Sometimes, older properties have confusing or outdated legal descriptions. A local real estate law firm can easily run this title search for you to verify the exact legal standing of your ownership.
Step 2: Understanding the Beneficial Ownership Rules
For the CRA to assess a capital gains tax, there must be a “disposition” of property . Under Canadian tax law, if you sever a 50/50 joint tenancy into a 50/50 tenants in common arrangement, your beneficial ownership has not changed. You still own exactly half the economic value of the property. Because there is no change in beneficial ownership, the CRA does not consider a sale to have occurred, meaning zero capital gains taxes are triggered at this time.
Step 3: Drafting the Severance Documents
You will need a lawyer to draft a formal legal document, often called a Transfer or a Severance of Joint Tenancy. Interestingly, in most Canadian provinces, you can sever a joint tenancy unilaterally. This means you do not necessarily need the permission or the signature of the other co-owner to change the title to tenants in common, though providing them with formal written notice is often required.
Step 4: Registering the Change at the Land Title Office
Once the documents are drafted and signed in front of a commissioner of oaths, your lawyer will electronically submit them to the provincial land registry system (such as Teranet in Ontario or the Land Title and Survey Authority in BC) 📄. The government will update the official parcel register to reflect the new tenants in common status.
Step 5: Updating Your Last Will and Testament
This is the most critical step. Now that the right of survivorship is eliminated, your share of the property will fall directly into your estate when you die. You must immediately update your will to explicitly state who should inherit your fractional share of the real estate. Without a valid will, your share will be distributed according to provincial intestacy laws, which may not align with your wishes.
How Much Does it Cost to Dissolve a Joint Tenancy?
While you avoid capital gains taxes, severing a joint tenancy does incur standard legal and administrative expenses 💸.
- Land Registry Fees: Provincial governments usually charge a nominal fee to register a new deed, typically between $75 and $150 CAD.
- Law Firm Fees: Hiring a real estate lawyer to draft the severance documents, run title searches, and file the paperwork generally costs between $500 and $1,500 CAD.
- Land Transfer Tax: Because no money is changing hands and the beneficial ownership percentage remains the same, you generally qualify for an exemption and will pay $0 CAD in provincial land transfer taxes.
| Right of Survivorship | Yes (Automatic transfer to survivor) | No (Passes through your estate/will) |
| Capital Gains on Severance | N/A | None (if beneficial % remains identical) |
| Ownership Shares | Must be perfectly equal (e.g., 50/50 or 33/33/33) | Can be unequal (e.g., 70% and 30%) |
How Long Does the Process Take?
Changing how you hold title is a surprisingly fast legal procedure 🕑. Once you retain a real estate lawyer, drafting the documents and electronically registering the severance at the land title office usually takes 1 to 2 weeks. However, updating your broader estate plan and drafting a new Last Will and Testament alongside the title change may take an additional 3 to 4 weeks.
Frequently Asked Questions (FAQ)
Do I need to notify the CRA when I sever a joint tenancy?
No. If the beneficial ownership percentages remain exactly the same (e.g., 50/50 to 50/50), there is no disposition of property. You do not need to report this specific administrative title change on your annual T1 General tax return.
Can my ex-spouse stop me from severing the joint tenancy?
Generally, no. In common law provinces across Canada, a joint tenant has the unilateral right to sever the tenancy. You can instruct your lawyer to file the paperwork without your ex-spouse’s consent, though they must receive formal notice.
Will severing the title affect my mortgage?
Severing the tenancy changes your relationship with your co-owner, not your relationship with the bank. Both owners remain fully “jointly and severally” liable for the entire mortgage debt, regardless of how the title is structured.
What if we change the ownership percentages during the severance?
If you shift from a 50/50 joint tenancy to a 70/30 tenants in common arrangement, a disposition has occurred. The person who gave up 20% of their equity may trigger a capital gains tax event and could also be subject to land transfer taxes on that specific portion.
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