The (Limited) Rights And Obligations Of Tenants In Common

INTRODUCTION

Many contracts in the oil and gas joint venture context provide that the parties' ownership in assets is held as "tenants in common". For example, the 2015 CAPL Operating Agreement provides at Clause 1.05(A):

[...] The Parties intend that their interests in the Joint Lands and in all other Joint Property will be held as tenants in common, subject to those modifi- cations expressly provided under the Agreement [...] When there is no agreement governing co-ownership of property, the default legal position under the Law of Property Act (the main legis- lation governing property ownership rights in Alberta) and the common law is that the parties hold their interests as tenants in common, and except as varied by contract, have the corresponding rights and obligations with respect to that ownership. For example, this is relevant in the world of Construction, Ownership and Operation Agreements which are frequently negotiated but ultimately go unsigned. What does it mean to be a tenant in common then? As reviewed below, the concept of tenancy in common is rooted in historical property law principles, initially developed under English law, and then adopted into Canadian law. In practice, the precise rights and obligations associated with being a tenant in common are somewhat antiquated and may offer less protec- tions than one might expect. The law governing tenants in common can always be varied by contract. Contracting parties should ensure that the applicable contract documents reflect the desired relationship between them, and also make sure to always sign their agreements.

... the concept of tenancy in common is rooted in historical property law principles, initially developed under English law, and then adopted into Canadian law. In practice, the precise rights and obligations associated with being a tenant in common are somewhat antiquated and may offer less protections than one might expect.

TENANCY IN COMMON IN THEORY

English and Canadian law recognize the following basic principles with respect to co-ownership of property:

Right of Possession and Use: each co-owner is entitled to possession of the common property and the use and enjoyment thereof and no co-owner can oust another co-owner from the common property. 2. Law of Waste: a co-owner cannot destroy the common property. 3. Duty to Account: if one co-owner receives more than its share (which is its percentage ownership interest in the property) of the revenue from the...