Joint Tenancy vs. Tenancy in common: An informative guide on its benefits and pitfalls

Buying a property is one of the most vital steps in a person’s life, indeed! If you are thinking of making a purchase with someone else, then the key decision is based on how you should own that property – i.e. joint tenants vs tenants in common. The selection of purchase will depend on different factors including the relationship with the co-purchaser and your own situation.

Both of these ownerships set you as joint owners, however, there are slight differences between the two. Though the word “tenant” is mainly used when someone rents a building or a property, in this context, it is explained as ownership.

It is accompanied by certain benefits which may include the security of tenure, furnishing the home according to likes and interests, and ease to sell and move to another place whenever they want. Unfortunately, to have sole ownership of a property is not more than a dream for many, greatly due to the financial constraints.

If you have financial constraints then other options can be tried to have ownership of a property such as joint tenancy or tenancy in common.  Let’s explore more on the concepts, benefits, and pitfalls.

Joint tenancy

Joint tenancy is explained as an arrangement that permits beneficiaries to access the account without having to visit court. Business partners and couples can take title to bank accounts, real estate, and personal property of each other as a joint tenancy with rights of survivorship (JTWROS).

With the joint tenancy, every person involved in the ownership of the property has complete right over the entire property. In case when one owner dies, the share of the property will automatically divide into other joint tenants (s).

This procedure is known as the right of survivorship in legal terms which also states that not more than 4 individuals are authorized to share property ownership as joint tenants.

The legislation for the right of survivorship is a set of laws processed for joint tenants and will be followed accordingly without considering your will if a joint tenancy is your option. This specifically implies that your share in the property will automatically be transferred to the remaining tenants after your death unless you withdraw from the agreement before you die.

Historically, the tenancy laws require the co-owners to segment four unities before the agreement of joint tenancy is created; this includes:

  • Time – Property interest must be obtained at the same time by the tenant (s).
  • Title – The agreement deed must represent the tenant(s) as the owner of the property.
  • Interest – Tenant(s)/ owners must have the same interest in the property.
  • Possession – Tenant(s) have the possession rights of the concerned property.

Serving the tenancy deed can be carried out with the written documents at any time. If you find that the terms are disagreeable or you wish to add further clauses that are agreeable with both parties, then a court order may be required for this purpose.

Tenancy in common

A joint tenancy and the tenancy in common differs slightly from each other. The ownership share can be explained with respect to proportion to contributions. However, it is not necessary for tenants in common to share an equal interest in the property. Moreover, a share can be defined in the property for each person.

For instance, in the tenancy deed, you may decide to keep an equal share of the property or one of the owners may take 70% and others may have 30% interest in the property. Other than this, the owner may decide the division of property in other ways like devoting a percentage of interest to each tenant.

Tenancy in common agreements also states that, if one owner dies, then the share and the ownership of the deceased tenant does not automatically pass to other joint tenants, but according to the will of the deceased. In situations where there’s no will created by the deceased owner, then the ownership of the portion will be distributed by following intestacy laws.

Therefore, choose the agreements wisely! If you want the share to be passed on to your children, not to the joint owners, then you should select tenancy in common rather than a joint tenancy agreement. Tenancy in the common agreement provides you with the assurance that your owned property will be transferred to your chosen candidate and not to the joint owners.

Joint tenancy vs. Tenancy in common – pros and cons

Joint tenants

In joint tenancy, you share equal rights with the joint owners with whom you are buying your property. The option of buying a property often works well when you want to own a property and share equal rights with your relative; it can be your spouse as well.

It simplifies the financial burden and provides benefits to the joint owners with the least intricate process involved. Some pros and cons of the joint tenancy are discussed below:

There’s no precise agreement for joint tenancy. If the joint tenants are in a relationship, then a detailed affidavit or agreement defining the ownership is least required. This is beneficial in terms of reducing the paperwork and documentation involved in a legal process. However, in joint tenancy, it doesn’t permit you to do any unequal ownership and people take this option as a disadvantage in joint tenancy. This is because if tenants make unequal financial contributions they will still get the equal share as of the other tenants. Suppose you have paid 70% of the finances of the property, you will still own 50% of the property.

Selling a joint property may also require the assurance of tenant(s). If you found a good price against your property, both tenants have to sign the transfer agreement to legally sell the joint property. If mutual consent for selling the property cannot be established, then a court order would be needed to comply. After the sale of joint property, the amount will split equally between both parties as they have the same interest in the whole property regardless of the amount one has paid at the time of possession.

In joint tenancy, there’s no way that you can transfer your investments to your legal heirs. The portion of the property you own will come under the ownership of other joint tenants after your death.

Tenants in common

In tenants in common, there’s much more flexibility in the rules as compared to joint tenancy. In tenants in common, parties are allowed to have different percentages of shares in the property. If you want to invest your finances for saving purposes and you don’t want to purchase the property with someone that is in your close relation, then this can be a rational choice.

Share of your owned property can be defined as the investment percentage. There’s no mandatory rule for tenants to have equal shares whether they have invested less in the property, rather beneficial and distinct shares can be defined for every tenant. It is upon the convenience and the financial constraints a tenant may have at that time. There’s also no ownership rule according to the size of the investments, it’s just the way that works for your co-owner and you.

A Deed of trust is an agreement that tenants in common should have. It is not legally required but works well for the owners who urge transparency when the matter of ownership comes under the light. It is also profitable when the partnership breaks down and the financial interests are set. Through a deed of trust, the responsibilities and the interests are legally partitioned without having everything in a farrago.

Tenants in common are allowed to sell their portion of the property to anyone they want. There’s no need to involve other tenants. Additionally, no deterrence prevents a tenant from making certain sales.

Joint tenancy and tenancy in common – How can an attorney help?

What if you signed the agreement with clauses that go against you? Property-related decisions come with huge financial consequences most of the time. Before you decide to share ownership of your property it will be beneficial for you to take professional advice.  Consider hiring an experienced real estate attorney for your tenancy agreements to avoid any possibility that can turn your future down.

The bottom line

Both joint tenancy and tenancy in common have vibrant and attractive features. Moreover, the individuals should evaluate their situation in order to determine favorable options before setting up the arrangement.

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