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December 2014 - Joint ownership of a house by husband and wife is ideal but it could be a problem

Joint ownership of a house by husband and wife is ideal but it could be a problem

☳ by Adam Aspilla

When a couple buys a house it is common that it is in the name to both husband and wife, it is called “joint ownership”. This is ideal for when one spouse dies the surviving spouse owns the property 100%. Moreover, in a joint ownership any of the spouses could not sell the house nor refinance the mortgage without a written consent of the other.

With the foregoing advantages, joint ownership is great for as long as the couple is in good standing of their outstanding financial obligations particularly individual debts (debts by husband or wife alone). When a husband or wife defaults on his/her financial obligations, a creditor could sue in the court of law to collect the principal sum owing plus interest and legal costs.

When a judgment is rendered against a husband or wife and the judgment amount remains unpaid, a creditor (plaintiff) may request the court for an order to execute the judgment. When the request for execution is granted, it would be recorded in the sheriff’s office. The execution would be against the defendant – spouse. 

Should this happen, a couple could not sell the house nor refinance the mortgage until the outstanding judgment amount is paid in full. Moreover, in a worse case scenario, a creditor (plaintiff) may initiate a power of sale action to sell the jointly own property to collect the judgment amount.

The above scenario usually happens when a husband or wife is self-employed (operates his/her own business), and the business went under and has outstanding debts, where a husband/wife is personally liable.

A good example was a husband (jointly owned a house with his wife) who was operating his own business and went broke. His business was heavily indebted (unsecure debts) and he was personally liable. There were already Statement of Claims served to him and he simply ignored. 

He wanted to file consumer proposal or bankruptcy. However, because their house had equity, he could not do either one without affecting the equity of their house, for creditors could demand that their house be sold so his (husband) 50% of the equity would be used to pay his creditors. 

The writer suggested to the husband to go to the sheriff’s office to find out if there were executions registered against his name. He found out that executions were already registered against him. With the executions, he could not clear up his debts from creditors who obtained executions against him by either bankruptcy or consumer proposal, because those creditors became secured creditors. In bankruptcy and consumer proposal only unsecure debts are included.

Though joint ownership is ideal for husband and wife, if a wife or husband is self-employed and the business is not yet established financially, joint ownership could be a problem down the road as in the above case scenario. You may buy a house in the name of the husband or wife only and make the other spouse as co-signer and not a joint owner. 
Another option is a joint ownership but the spouse who is self-employed would own only as low as 1% ownership instead of 50-50.



Adam Aspilla is a Senior Financial Counselor of the Debt Clinic of Canada Inc. and the author of the book, You Can Negotiate All Your Debts. He also writes a biweekly column, “What Matters In Life” in “Taliba Newspaper. For free initial, professional and confidential consultation, please call 905-306-7572.