Have you ever wondered what happens to a property when multiple people own it together? Welcome to the world of concurrent estates! Joint tenancy vs common tenancy; which one to choose is a common dilemma but a very important decision to make when purchasing a property. Today, we'll break down the differences between joint tenancy and common tenancy, which are the two popular forms of property ownership.
Whether you're considering joint tenancy for equal rights or opting for the flexibility of tenancy in common, we'll cover all you need to know in plain English. Stay with us to understand how these choices impact your property rights and future planning.
What is Joint Tenancy?
Joint tenancy is a more restrictive form of property ownership but ensures equal rights for all owners. The property is a jointly owned property.
Here’s what you need to know:
Joint Tenants Have Equal Ownership:
In joint tenancy, all owners share the same amount of ownership at the same time. For example, if three people own a property, each one has an equal one-third share.
It's Most Common Among Spouses:
This form of ownership is often chosen by married couples, business partners, and family members who wish to hold property together. Joint tenancy ensures that all joint tenants have an equal stake in the property, fostering a sense of shared ownership and responsibility. This is for its simplicity and equal distribution of property rights and the automatic ownership transfer to the surviving spouse.
Joint tenancy adheres to four basic unities:
- Time: All owners acquire their interest at the same time.
- Title: All owners have the same title to the property.
- Interest: All joint owners have an equal interest in the entire property.
- Possession: All owners have equal rights to possess the entire property.
If any of these unities are broken, the joint tenancy becomes a tenancy in common.
Read Also: A Comprehensive Guide to Property Transfer Tax n BC
Creating Joint Tenancy
To create a joint tenancy, all joint tenants must acquire their ownership interests in the property simultaneously, through the same legal instrument or document. This means that all joint tenants must be listed as co-owners on the same deed or other appropriate legal documentation. Additionally, all joint tenants must have equal rights and interests in the property, and each joint tenant must have an undivided interest in the entire property. This simultaneous acquisition and equal ownership are crucial to establishing a valid joint tenancy, ensuring that all co-owners are on equal footing from the outset.
Advantages of Joint Tenancy
Joint tenancy offers several advantages, including:
- Simplified property transfer: When a joint tenant dies, their interest in the property automatically passes to the remaining joint tenant(s), avoiding the need for probate or estate administration.
- Shared financial responsibilities: Joint tenants share equal financial responsibilities for the property, including mortgage payments, property taxes, and maintenance.
- Increased flexibility: Joint tenancy allows for the transfer of ownership interests without the need for probate or estate administration.
- Tax benefits: Joint tenancy can provide tax benefits, such as the ability to transfer ownership interests without triggering capital gains tax.
These benefits make joint tenancy an attractive option for those looking to simplify property transfer and share financial responsibilities equally among co-owners.
Severing Joint Tenancy
Joint tenancy can be severed through various methods, including:
- Unilateral sale: A joint tenant can sell their interest in the property to a third party, which can sever the joint tenancy.
- Mutual agreement: Joint tenants can agree to sever the joint tenancy and convert it to a tenancy in common.
- Court intervention: A court can sever a joint tenancy if it is deemed necessary, such as in the event of a dispute between joint tenants.
Severing a joint tenancy changes the nature of the property ownership, often converting it to a tenancy in common, where each co-owner holds a distinct share that can be independently transferred or inherited.
What is Tenancy in Common?
Tenancy in common is the most adaptable form of property ownership. Here's why it might be the right choice for you:
- More Flexible Ownership: Tenants in common can have different ownership percentages. For instance, Tenant A might own 20%, Tenant B 30%, and Tenant C 50%. This allows tenants in common to have an interest in the property owned according to unique or specific needs.
- Varied Acquisition Times: Unlike joint tenancy, ownership shares can be acquired at different times. One tenant might join years after the others.
- Separate Conveyances: Ownership shares can be documented through separate conveyances. For example, Tenants A and B might share one title, while Tenant C has a distinct title.
This form of ownership is popular among:
- Multi-Generational or Blended Families: This provides flexibility in ownership shares. This is an option for large, multi-generation households with tenants in common requiring different amounts of space while desiring to own a portion of the property.
- Vacation Home Co-owners or Business Partners: Allowing varied ownership stakes during different weeks, months or seasons of the year.
Note: Tenancy in common is often chosen when property titles are shared between individuals and corporations, as corporations don’t “die” but dissolve.
Joint Tenancy vs Common tenancy: The Big Difference
One key difference between joint tenancy and tenancy in common is what happens to the property when an owner passes away.
For Joint Tenancy:
If a joint tenant dies, the interests automatically transfer to the surviving joint tenant (or tenants). This seamless transfer avoids the need for probate, making it a popular choice for spouses and close family members.
For example, let's say a husband and wife enter a Joint tenancy. Unfortunately, if the husband passes away, the sole owner and interests of the property would go to the wife (the surviving spouse).
For Tenants in Common:
There is no right of survivorship. Instead, the deceased owner’s interests are transferred to their estate. This can lead to probate fees and potential delays. The heirs of the deceased will inherit the property interests rather than the surviving owners.
What Can Help Me In a Common Tenancy?
Only Joint Tenants have the Right of Survivorship. However, a notarized will help manage the division of property among heirs, ensuring a smoother transition and reducing potential conflicts.
This legal document clarifies how the deceased's share should be distributed. This provides a clear plan, less hassle, and peace of mind for all parties involved.
Read Also: Which Real Estate Documents Need Notarization?
Conclusion
We know it can be confusing, but understanding the differences between joint tenancy and tenancy in common is important when deciding on property ownership.
Joint tenancy ensures equal ownership and automatic transfer of interests upon death, while tenancy in common offers flexibility with varied ownership shares and inheritance through the estate.
Get Real Advice From Professionals Regarding Home Ownership
If you're entering a concurrent estate agreement, you should contact us at CH Notary in Clayton Heights.
We'll provide clarity and legal guidance whether you're entering a joint tenancy, a tenancy in common, or if you're unsure which is best. Our notary can help you navigate the complexities, ensure proper documentation, and offer peace of mind with your property arrangements.
Reach out to your friendly neighbourhood notary today for expert, easy assistance!