Your Trusted Real Estate Advisors. Let Us Help You!
Navigating Co-Ownership of Property: Reasonable Expectations and the Court's Discretion
Theresa Baird
Tuesday, May 30, 2023
Introduction:
Co-owning a property can be a lucrative investment opportunity, but it also comes with its share of challenges. When disputes arise between co-owners, the right to compel a partition or sale of the property is not absolute. In cases involving malice, oppression, or vexatious intent, the court can intervene to protect the reasonable expectations of the parties involved. A recent court case, Green et al. v. Gardeazabal, sheds light on the importance of defining these expectations and understanding the court's contextual approach to such disputes.
Setting the Stage:
In mid-2021, Ms. Green, Mr. Dutra, and Ms. Gardeazabal considered purchasing an investment property together. Their discussions revolved around achieving a return on investment within two years. However, when they purchased the property in Severn, Ont., in April 2022, they failed to establish written contracts or agreements governing their joint venture. This lack of clarity would later become a critical point of contention.
Conflicting Interests:
Shortly after the purchase, Green and Dutra expressed their desire to sell the property. They presented Gardeazabal with various options, including a potential buy-out of their interests. Instead of engaging in a constructive dialogue or presenting a counteroffer, Gardeazabal took a defensive stance. She allowed the mortgage to renew automatically, effectively thwarting Green and Dutra's attempt to exit the investment. Subsequently, Green and Dutra filed an application for the sale of the property, leading to a legal battle.
Reasonable Expectations:
Gardeazabal argued that Green and Dutra's conduct before the purchase created a reasonable expectation that the property would be held for at least two years. She claimed to have relied on these expectations when contributing her life savings to the down payment. Furthermore, Gardeazabal stated that she had formed a company with Green and Dutra for property management and rentals, indicating her commitment to the venture. She believed that Green and Dutra's sudden change of heart was coercive, abusive, and disregarded her interests.
Disputing Expectations:
Green and Dutra countered Gardeazabal's claims by highlighting the absence of a formal agreement specifying the duration of property ownership. They argued that any references to a timeline were merely projections subject to the uncertainties of real estate investment. Additionally, they raised concerns about Gardeazabal's management of funds from vacation renters, leading to a breakdown in trust.
Understanding the Partition Act:
The court's decision in Green et al. v. Gardeazabal was guided by the Partition Act. Under this act, all tenants in common possess a prima facie statutory right to compel a partition or sale. However, the court can exercise its discretion to refuse such requests if the resisting party demonstrates malice, oppression, or vexatious intent causing hardship. It is crucial to consider any agreements between the parties when exercising this discretion.
Oppressive Conduct and Reasonable Expectations:
Justice Harper emphasized the importance of examining oppressive conduct and reasonable expectations within the context of the Partition Act. Oppressive conduct involves behavior that undermines the reasonable expectations of the parties, coercing or unfairly disregarding a party's interests. Reasonable expectations are shaped by the specific circumstances, relationships, and overall context of the situation. The court, in deciding whether to grant a remedy under the Partition Act, considers the impact on the party seeking to avoid a sale.
Application of the Law to the Case:
Justice Harper ruled in favor of Green and Dutra, stating that there was no agreement on the terms of the investment venture. The discussions, planning, and due diligence preceding the property purchase did not establish a reasonable expectation to hold.
Source: Real Estate Magazine written by Shaneka Shaw Taylor
Co-owning a property can be a lucrative investment opportunity, but it also comes with its share of challenges. When disputes arise between co-owners, the right to compel a partition or sale of the property is not absolute. In cases involving malice, oppression, or vexatious intent, the court can intervene to protect the reasonable expectations of the parties involved. A recent court case, Green et al. v. Gardeazabal, sheds light on the importance of defining these expectations and understanding the court's contextual approach to such disputes.
Setting the Stage:
In mid-2021, Ms. Green, Mr. Dutra, and Ms. Gardeazabal considered purchasing an investment property together. Their discussions revolved around achieving a return on investment within two years. However, when they purchased the property in Severn, Ont., in April 2022, they failed to establish written contracts or agreements governing their joint venture. This lack of clarity would later become a critical point of contention.
Conflicting Interests:
Shortly after the purchase, Green and Dutra expressed their desire to sell the property. They presented Gardeazabal with various options, including a potential buy-out of their interests. Instead of engaging in a constructive dialogue or presenting a counteroffer, Gardeazabal took a defensive stance. She allowed the mortgage to renew automatically, effectively thwarting Green and Dutra's attempt to exit the investment. Subsequently, Green and Dutra filed an application for the sale of the property, leading to a legal battle.
Reasonable Expectations:
Gardeazabal argued that Green and Dutra's conduct before the purchase created a reasonable expectation that the property would be held for at least two years. She claimed to have relied on these expectations when contributing her life savings to the down payment. Furthermore, Gardeazabal stated that she had formed a company with Green and Dutra for property management and rentals, indicating her commitment to the venture. She believed that Green and Dutra's sudden change of heart was coercive, abusive, and disregarded her interests.
Disputing Expectations:
Green and Dutra countered Gardeazabal's claims by highlighting the absence of a formal agreement specifying the duration of property ownership. They argued that any references to a timeline were merely projections subject to the uncertainties of real estate investment. Additionally, they raised concerns about Gardeazabal's management of funds from vacation renters, leading to a breakdown in trust.
Understanding the Partition Act:
The court's decision in Green et al. v. Gardeazabal was guided by the Partition Act. Under this act, all tenants in common possess a prima facie statutory right to compel a partition or sale. However, the court can exercise its discretion to refuse such requests if the resisting party demonstrates malice, oppression, or vexatious intent causing hardship. It is crucial to consider any agreements between the parties when exercising this discretion.
Oppressive Conduct and Reasonable Expectations:
Justice Harper emphasized the importance of examining oppressive conduct and reasonable expectations within the context of the Partition Act. Oppressive conduct involves behavior that undermines the reasonable expectations of the parties, coercing or unfairly disregarding a party's interests. Reasonable expectations are shaped by the specific circumstances, relationships, and overall context of the situation. The court, in deciding whether to grant a remedy under the Partition Act, considers the impact on the party seeking to avoid a sale.
Application of the Law to the Case:
Justice Harper ruled in favor of Green and Dutra, stating that there was no agreement on the terms of the investment venture. The discussions, planning, and due diligence preceding the property purchase did not establish a reasonable expectation to hold.
Source: Real Estate Magazine written by Shaneka Shaw Taylor
We would like to hear from you! If you have any questions, please do not hesitate to contact us. We are always looking forward to hearing from you! We will do our best to reply to you within 24 hours !