What’s the Difference Between Joint Tenants and Tenants in Common?
Understanding how property ownership works is crucial when buying or sharing ownership in real estate.. Both have unique features and implications that affect rights, responsibilities, and how the property is handled in the future. Let’s explore joint tenants vs tenants in common, the ownership types in detail to help you make an informed choice.
Joint Tenants: Definition, Key Characteristics, and More
Joint tenancy is a type of property co-ownership where two or more individuals share equal ownership of a property. A defining feature of this arrangement is the right of survivorship, meaning that when one owner passes away, their share is automatically transferred to the surviving co-owners.
- Right of Survivorship: The property passes directly to the surviving co-owner(s), bypassing the deceased’s will or estate.
- Undivided Share: All joint tenants have an equal, undivided interest in the property. For example, if there are two owners, they each own 50% of the entire property, not specific portions.
- Joint tenancy needs the unities of the following:
- Interest: Each owner has an identical share.
- Title: All owners acquire their interest through the same document or transaction.
- Time: Ownership must begin at the same time for all parties.
Examples and Implications of Joint Tenants Ownership
Consider two siblings buying a house as joint tenants. If one sibling dies, their share automatically transfers to the surviving sibling, regardless of what the deceased’s will specifies. This arrangement is often favored by couples and families to simplify succession. However, joint tenancy can create complications if one co-owner wants to sell their share or if disputes arise.
Tenants in Common: Definition, Key Characteristics, and More
Two or more people can co-own a property under tenancy in common, but their ownership shares are unique and independent. Unlike joint tenancy, there is no survivorship entitlement and equal shares are not required.
No Right of Survivorship: In the event of a co-owner’s death, their portion of the property is included in their estate and is divided in accordance with their wishes.
Divided Share: The size of ownership shares might change. For example, one owner may own 70% of the business, while another owns 30%. It is possible to purchase, sell, or transfer these shares on your own.
No Need for Four Units: Unlike joint tenants, renters in common are not subject to the same stringent unit requirements.
Examples and Implications of Tenants in Common Ownership
Imagine three friends buying a vacation home. One contributes 50% of the purchase price, and the other two contribute 25% each. They hold the property as tenants in common, reflecting their investment proportions. If one owner decides to sell their share, they can do so without needing approval from the others. This flexibility makes tenancy in common popular among business partners or unrelated co-owners.
Joint tenants vs Tenants in common: Key Differences
| Feature | Joint Tenants | Tenants in Common |
| Right of Survivorship | Yes | No |
| Ownership Shares | Equal for all co-owners | Can be unequal |
| Four Unities Required | Yes | No |
| Transferability | Requires joint agreement for transfer | Individual shares can be transferred independently |
| Estate Inclusion | Not part of the deceased’s estate | Part of the deceased’s estate |
Practical Implications
- Estate Planning: Joint tenancy simplifies succession but may limit flexibility. Tenancy in common provides more control over individual shares but involves probate.
- Investment: Tenancy in common allows co-owners to tailor ownership to their contributions, making it ideal for business ventures or investments.
- Dispute Resolution: Joint tenancy requires unanimous decisions, which can complicate matters. Tenancy in common offers more autonomy for individual owners.
Conclusion
Your unique situation and objectives will determine whether you should choose tenants in common or joint tenants. Couples or close family members who value ease and automatic succession are good candidates for joint tenancy. Tenancy in common is a preferable choice for individuals with unequal contributions or company partners since it provides flexibility and control.
Making the best choice when it comes to property ownership requires an understanding of these distinctions. Think carefully about which arrangement best suits your needs, whether you’re investing with friends, purchasing a property with a spouse, or making future plans. Get in touch with the team at Hammond Law Group to seek professional assistance!
FAQs
1. What is the primary distinction between tenants in common and joint tenants?
The primary difference lies in the right of survivorship. Joint tenants automatically inherit a deceased co-owner’s share, while tenants in common do not.
2. Can joint tenants sell their share of the property?
Yes, a joint tenant can sell their share. However, selling may convert the ownership into tenancy in common for the remaining co-owners, affecting the right of survivorship.
3. Do tenants in common need equal shares?
No, tenants in common can hold unequal shares. Ownership is typically based on contributions or agreements, allowing flexibility to tailor shares according to each co-owner’s input.
4. Which type of ownership is better for estate planning?
Tenancy in common is generally better for estate planning as it allows co-owners to pass their share through a will or trust.
5. Can I change ownership from joint tenants to tenants in common?
Yes, ownership can be changed by a legal process called “severance of joint tenancy.” This involves modifying the title deed to reflect the new arrangement.
6. Who should consider tenants in common ownership?
Tenants in common are ideal for co-owners who want independent control of their shares, such as business partners or individuals with different investment contributions. It provides more flexibility than joint tenancy.
