I do not know about the regulations in Canada, but I think your chimney sweep is right. Your house was probably build years ago before contemporary safety regulations for chimneys were put in place. Sharing a flue with an adjacent house is definitely a no-no here in the US. In fact, two fireplaces sharing the same flue would, I believe, be against code in most communities in the US, even if the two fireplaces were in the same private home. I have a feeling that the regs in Canada are a bit stricter than in the US.

Unfortunately, this means that you probably cannot use your chimney unless you alter it so that it meets the specification of the regulatory agencies responsible for maintaining safety standards. I think that if you want to use your fireplace, you will have to get an assessment from an impartial person (someone who will not actually undertake any work for you), so you can be assured that you are not being asked to undertake expensive alterations that may not be needed but that your "assessor" wants to do for you and charge you a goodly sum for. Don't fall into that trap.

@hiddentrails: I have just bought a similarly aged semi-detached home in Toronto and got the fireplace/chimney cleaned and was told exactly the same thing. How did you resolve your situation? Did you need to repair/replace part of the chimney to "separate" the flues?

My neighbour seems to use their fireplace with no concerns, but we were told we couldn't.

Who should I believe!?