Co-Ownership of Real Property: Sort It Out or Risk Having It Sold
There are innumerable reasons that parties may find themselves co-owning real property with friends, family or business partners and just as many reasons why that co-ownership relationship may turn sour. When there are intractable differences between co-owners and one or more of them wish to “get rid” of their interest in the subject property or the property, the Partition of Property Act, R.S.B.C. 1996, c. 347 is often tuned to as was the case in the recent decision of Durrani v Lehal, 2018 BCSC 2489 (CanLII).
In the case, Messrs. Durrani and Lehal purchased an investment property with the intention of sharing in rental income, sharing in expenses associated with the property and, presumably, sharing in any profit earned on its future sale. Things went well for 11 years or so until it came time to do repairs and renovations to the property and the two gentlemen could not work out their differences. The situation was exacerbated by Mr. Legahl moving into the main portion of the property and a claim for an interest in the property advanced by a third party, Ms. Pabla, who had been residing with Mr. Lehal.
Mr. Durrani eventually stated his intention to liquidate his interests in the subject property. Mr. Durrani sought to liquidate his interests through the Partition of Property Act. Mr. Lehal resisted that process on the basis that there were issues that had to be determined through a trial rather than the partition process.
The court confirmed that the purportedly triable issues raised by Mr. Lehal did not preclude the sale of the property given that such issues would result only in the need to determine the division of the proceeds of sale. The court noted that the Partition of Property Act has been held to provide that a party owning at least 50% interest in the property should not be denied the sale of the property except if there are “good reasons” not to allow such a sale. The Partition of Property Act similarly allows a minority owner to seek the sale, although the standard set for such relief is higher.
Mr. Lehal did not provide an undertaking to purchase Mr. Durrani’s interest in the property; an option available to remaining owners to preclude a sale when one or more of the other owners seek the sale of a property through the Partition of Property Act. Having failed to provide such an undertaking, the court saw no reason to delay its judgment or the sale of the proeprty. Similarly, any arguments about disproportionate contribution to renovation costs were not a reason to delay a sale with such claims further lacking an evidentiary basis.
Having found that an order for the sale of the property was appropriate, the court turned to the question of who should have conduct. The court rejected Mr. Lehal’s request for joint conduct of sale as that would be unlikely to result in harmonious sales efforts. Mr. Lehal’s occupation of the premises was also a factor in finding that he may not have been as motivated as Mr. Durrani to achieve the best price for the property. The court ultimately granted Mr. Durrani conduct of sale.
Durrani v Lehal is illustrative of the legislative authority courts have to resolve intractable disputes between owners of real property by simply ordering the property sold. This may come as a relief to some and cause chagrin to others. Well drafted co-ownership agreements can go a long ways to avoiding the potential sale of a co-owned property or disputes about what each owners’ responsibilities are and the option always remains for one owner to purchase the interest of others.