Legal Updates

In the absence of agreement regarding the dissolution of tenancy in common it will be dissolved by selling the asset and dividing the profits

July 1, 2020

Two tenants in common sought to dissolve the partnership but one of whom demanded the sale of the asset in its entirety and splitting the profit while the other demanded the sale of only the exiting partner’s share.
The Court held that the tenancy is to be dissolved by the sale of the asset in its entirety with the profits divided between the partners. Joint ownership of assets is undesirable. Therefore, the law created clear rules enabling each partner to bring about the dissolvement of the partnership at any time. The first, and most preferable path for dissolving a tenancy in common is by the parties' consent. However, in the absence of such consent, and because splitting the asset is not an option, the preferable path is the sale of the asset and division of the profits between the partners. The path of partial sale of the asset, absent mutual consent of the partners does not exist unless as a result of the complete sale material damage will be caused. When the partner invested his money in the asset by way of tenancy in common, he should have known that he may be required to dissolve it in the future and should have included an agreement on how to do so beforehand. In the absence of such an agreement, therer is no choice but to sell the asst as a whole and split the profit.