Debt Enforcement and Jointly-Owned Property – Lessons from a Recent Decision

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In the case of joint property ownership, where one party is indebted to an external creditor, what rights does the creditor hold when the property is sold? The Ontario Court of Appeal recently clarified this, concluding that creditors are only allowed to claim against the debtor’s divisible interest in the property. This verdict not only safeguards joint property holders who are not in debt, but also emphasizes the boundaries on creditors’ claims.

In Senthillmohan v. Senthillmohan, a separated husband and wife found themselves in a legal battle over the division of their net family property and the sale of their matrimonial home. An order was granted directing the sale of the home and that the net proceeds be held in trust pending further agreement or court order.

After the order was made, a third-party creditor (the “Creditor”), had obtained a judgement against the husband in an unrelated civil action and filed a writ against him.  After the writ was filed, the husband and wife entered into an Agreement of Purchase and Sale to sell the matrimonial home and the Creditor agreed to temporarily lift the writ to allow for the sale to proceed.

After entering into the Agreement of Purchase and Sale, the wife filed an urgent motion in the family action to sever the joint tenancy in the matrimonial home. The motion was granted, and title to the property was transferred to the husband and wife as tenants in common. However, the order did not address the Creditor or its judgement against the husband.

The wife then brought a successful motion to release her share of the net sale proceeds after the property sold.  In response, the Creditor appealed the order by challenging the retroactive severance of the joint tenancy and asserted that the wife’s interest should not take precedence over the writ.  The Creditor also argued that the writ should be attached to the entirety of the sale proceeds.

The Court of Appeal firmly rejected the Creditor’s appeal, making it clear that it could not seize the interest of a non-debtor joint tenant. The court emphasized that the Creditor’s understanding of its remedies in jointly held property disputes was flawed, specifically when only one property owner guaranteed the debt.

The court noted that the Creditor’s argument was based on the notion that joint tenants hold an undivided interest in the entire property, which would give the Creditor the right to claim against the full interest. However, the court clarified that a joint tenancy, despite its unity of title, interest, and possession, does not imply that the entire property can be divided when the debt is not jointly held.

In coming to its conclusion, the court examined the relevant provisions of the Execution Act, particularly section 9(1), which deals with execution against the lands of the execution debtor and any interest they hold in lands held in joint tenancy. The court unequivocally established that seizure and execution are restricted to the debtor’s severable interest in land held in joint tenancy. The court also stressed the importance of interpreting section 10(6), which binds the lands against which the writ is issued, in conjunction with section 9 and the right of survivorship.  Consequently, if a writ is filed against jointly held land before the debtor joint tenant’s death, it does not bind the surviving non-debtor’s complete interest in the property.

Similarly, in this case, the Creditor’s debt was only guaranteed by the husband and the wife therefore was not on the hook for debt.  As such, the Creditor’s writ could not trump her interest in the property.

This decision helps explain what rights creditors have in situations involving jointly-owned property, particularly when only party owes a debt. Even though this ruling was made during a family law case, it gives important rules that apply to collecting debt and dealing with property matters.

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About the Author:

Daniel Waldman is Of Counsel in the firm’s Toronto office. He has a broad commercial litigation practice with an emphasis on real property litigation, including commercial leasing, commercial real estate, construction law, and debt collection. Daniel can be reached at 416-644-2838 or To read his full bio, please click here.