One of the most common questions I've been asked most about Power of Attorney (POA) is, what if I don't have a POA and I become incapable of making decisions for myself?  My answer is - you're going to create a lot of trouble for your family or whoever needs to help you to manage your affairs.

When an adult needs help managing their affairs because of mental incapability due to an illness, accident, disability or diseases associated with aging, their judgment may be impaired in some way. They may forget to pay bills or put money away and forget where it is. The adult may also be confused about banking, investments, property, and personal belongings. However, they may have planned ahead and authorized someone else to make decisions and managing their financial and legal affairs through an enduring power of attorney.

But what if the adult does not have a POA? 

British Columbia has been able to develop one of the best land survey and title registration systems in the world.  

British Columbia, including the colonies before the province came into existence, has always maintained a system for recording ownership and interests in private land.   For a short while, the colonies maintained Deeds Registries.  However, a Deeds Registry results in a complicated, unreliable system for recording interests in land.   In order to gain an opinion on ownership of interests in land, an unbroken chain of documentary evidence over long periods of time or possibly from the original granting of the land from the Crown is required.   If any one of those documents was not properly executed, or if all documents in the chain cannot be obtained, then a shadow of doubt is cast upon the claim of ownership.

In many instances, banks and financial institutions require the borrowers to obtain a title insurance.  However, this policy only protects the bank’s interest and insures against financial loss in the event of a defects in title to the property.

In British Columbia, title defects rarely happen.  When a land title is transferred, the new owner can be assured that his/her title is “indefeasible” (meaning the title transfer cannot be defeated, revoked, or made void) under the Torrens system, as long as the owner acquires the interest in good faith and for value consideration.

When a non-resident Seller disposes a real property in Canada, the profit from the sale of the property is, in most circumstances, subject to capital gain.  If the Canadian Revenue Agency (CRA) cannot collect its fair share of tax that is supposedly remitted by the Seller, then the Buyer is on the hook and becomes liable for any tax owed by the non-resident Seller.

In order to avoid such situation in a purchase and sale transaction, the Seller’s legal representative must holdback 25% of the sale price for personal use property, or 25% of the land value and 50% of improvement value, prorated from current assessed values to actual price, for income generating property, until a clearance certificate is issued by the CRA.  In order to obtain the clearance certificate, the non-resident will need to retain the service of an accountant to apply such certificate.  The accountant will work closely with the Seller’s legal representative to ensure that the tax resulted in the disposition of the property is paid to the CRA from the holdback amount.  This process can take up to 4-6 months.
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Complication can arise if there is a mortgage on title.  Since the holdback amount is quite significant, there is a chance that the sale proceeds after the holdback is not enough to pay off the mortgage.  In such cases, the non-resident Seller will need to come up with extra funds from other sources to pay off the mortgage.  To minimize the chance of this happening, the Seller can apply for the Clearance Certificate prior to the completion date, however, this can only be done if there is a subject free contract of purchase and sale.  Since the process of obtaining the certificate can take up to 4-6 months, so in an ideal situation there would be a 4-6 months lead time between subject removal and the completion date.   In most cases that we see nowadays, subject removal and completion is only a few weeks apart, sometimes days.  Therefore, if you foresee such issue happening, please discuss with your lawyer or notary, and your accountant about your situation to ensure you have sufficient funds to pay off your mortgage on completion.

Joint Tenancy vs. Tenants in Common
Property owned by more than one person must be owned in one of two ways: Joint Tenancy or Tenancy in common.  When a property is owned in a joint tenancy arrangement, the interest of a deceased owner automatically gets transferred to the remaining surviving owner(s), meaning the surviving owner(s) has the right of survivourship.  On the other hand, if the property is in tenants in common, the interest in the property becomes owned by the estate of the deceased and is transferred to beneficiaries by the estate.

Joint Tenancy:

• On the death of one joint tenant, their interest in the land passes to the other joint tenants by the right of survivorship and the process continues until there is but one survivor, who then holds the property as sole.
• Each tenant holds common (or undivided) interest. If one owner dies, the remaining joint tenant(s) automatically inherits the property in equal proportions. This does not form part of the estate on one’s death.
• All joint tenants always own an identical and equal portion – for two tenants, 50% each and for four tenants, 25% each.
• Joint tenancy can avoid probate fees and delays. Shares are automatically passed on without probate court interference which can be a major advantage to Joint Tenancy.  
• All names of the group who are joint tenants will show up on the title of the property evenly.
• It is the most common way for a couple to own real property.
• The mortgage of a joint tenancy property requires the unanimous agreement of all joint tenants.
• A joint tenant in certain cases and geographical areas, can apply to the courts to have the land severed and provide each owner with a separate and distinct piece.
• For joint tenancy, approval for co-owner is not needed to break up a joint tenancy.
• All tenants can occupy and manage the property:
  • Can be problematic if one joint tenant refuses to pay their share of the property expenses.
  • If one pays ALL the expenses, they can ask for reimbursement for necessary costs e.g. Property Tax

Tenants in Common:

• Each tenant holds a percentage of interest in the property. If one of the owners dies, their interest in the property passes to their estate to be passed on according to their will.
• Tenants in common is usually used when tenants own the property in unequal shares, i.e. in different percentages.
• “Agreement between Tenants in Common” may be entered into which could override the rights which tenants would normally have under law.
• The tenants can hold equal or unequal shares: Every tenant owns an undivided share in the property therefore is free to possession of the whole property.
• Holder of tenancy in common desires, either to sell of mortgage their interest in the property, that can be done by them without the consent of other tenants
• Does not carry a right of survivourship: if one tenant dies, their interest does not go to the other tenants, but goes to the estate of the deceased. If there is a will, it’s distributed accordingly. However, if there is no will, there are provincial legislations and the person’s assets (including tenant’s interest of property) would be distributed to relatives according to that legislation.
• If an individual is purchasing properties for investment purposes with people that are not relatives, tenants in common would be appropriate as then their shares will not automatically go to the remaining tenants.

 
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