Joint Tenants vs Tenants in Common

Understanding Tenancy in Common and Joint Ownership in Alberta

Anna Dunaeva DLegal Anna Dunaeva March 8, 2022
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What Is Joint Tenants?

When it comes to joint tenants vs tenants in common, it is essential to first understand the difference between the two terms. The term “joint tenancy” (aka “joint ownership,” or “JT”) means a type of ownership in which two or more people own a property together and each owns 100%, to the result that each owner has equal rights and obligations in respect of the whole property ownership.

Any two or more people or organizations can create a joint tenancy. For example, a joint ownership arrangement can exist between spouses, friends, family members, and business associates. A joint tenancy is a broad legal concept and applies to various types of assets. For example, one can see joint tenants on titles of land, bank accounts, share certificates, etc.

What Are Tenants in Common?

The term “tenancy in common” (aka “TIC”) refers to share-based ownership where each two or more co-owners has just a portion in the whole property owned. There is no sole owner of the property. However, there are various ways to split ownership between tenants in common. The percentage of ownership can be equal or different among the co-owners. For example, two business associates may own an office building 50/50. Alternatively, 95% of a house may belong to a father, and two kids may each own 2.5% on the same deed.

When People Use Joint Tenancy and Tenancy in Common?

A joint tenancy and a tenancy in common are the primary forms to hold a property for two or more parties.

Joint tenancy is a usual arrangement for holding real estate or bank accounts between legally married couples. However, it can work well between parents and children on occasions or be a good estate planning strategy.

Tenancy in common is a popular way to hold real estate for friends, siblings, or other unmarried parties. It is also a usual way to handle business interests in a partnership or corporation.

Pros of Joint Ownership

An essential perk of joint tenancy is a right of survivorship which means that the interest of a deceased joint owner can fall outside of his estate and property passes on to the surviving joint tenant. As a result, the surviving joint tenants can receive the share of the deceased co owner without a will or probate.

However, please note that joint tenancy does not always create the right of survivorship! The god is in detail, and the rules of joint ownership are more complex than they seem to be. Also, the joint tenancy has considerable drawbacks. Be very cautious and make sure to discuss your plan with a lawyer.

Pros of TIC

It is often easier to purchase a property as tenants in common with a friend or relative because each will contribute their respective share to the closing costs, deposits, legal fees, and mortgage payments. For the same reason, maintaining the property may be less expensive.

Further, because each tenant in common owns only a portion of the whole, they can only control their respective portion of ownership and are only responsible for their part of the related financial obligations. For example, suppose you have a house 50/50 with a son whose ex-spouse claims a share in their family property. In that case, the ex-spouse may only have recourse against the 50% of the house that belongs to the son.

Further, each tenant in common can sell, borrow against or otherwise deal with their share without the consent of the other co-owners.

For the same reason, a share of a tenant in common becomes a part of his estate upon death. It doesn’t automatically go to the surviving owner as with joint tenancy. In other words, shares of tenants in common get distributed according to their Will and require probate.

Cons of Joint Tenancy

While each joint tenant enjoys 100% benefits of the property, each joint tenant is also equally responsible for all debts associated with it. So, for example, if one joint owner fails to pay property taxes or mortgage, the other joint tenants must assume the financial obligation.

Another disadvantage of joint tenancy is that each transaction with the jointly held asset requires the consent of all its joint owners. So, if a joint owner wants to sell or mortgage a jointly held real estate or close a joint bank account, they will need to obtain consent from the other partners within the ownership structure.

Another tricky thing about joint tenancy is that it can transfer all the rights of a deceased joint owner to the survivors. For example, suppose a deceased had a house jointly with his spouse and had a child from a previous relationship. So even if the deceased was hoping the wife and the child to share the house equally, the surviving spouse has no legal obligation to honor that wish.

People often decide to add a child as a joint tenant to their property as part of their estate planning strategy to help the child in avoiding probate fees. Unfortunately, they do not discuss it with a lawyer and create more risks than benefits. For example, assume the adult child makes considerable debts or faces property division due to a family breakdown. Because the child has equal rights to the jointly held asset as the parents, the child’s creditors or ex-spouse can seek to satisfy their claims from it.

Cons of Tenancy in Common

With this form of ownership, each owner controls only a part of the whole asset. As a result, there is always a possibility of a dispute between co-owners. For example, co-tenants may have different views on how to maintain a house, or some of them may want to sell it instead of retaining it. However, because it is easier to sell and upkeep the whole house, all co-owners must agree to go forward. In cases where tenants in common cannot reach an agreement, they may seek a court intervention or buy out other co-owners.

Further, because a share of a tenant in common goes to his estate, probate will be inevitable most of the time. In this case, the heirs of the deceased may need to incur legal costs and spend some time before receiving the inheritance.

What Is the Difference Between a Joint Tenancy and Tenancy in Common?

The main difference between common or joint tenancy is how the shares can be handled during an owner’s lifetime and on their death.

The key feature of a joint tenancy is that each joint tenant owns the whole asset and needs the consent of all other joint tenants for each transaction. Also, suppose a joint tenancy arrangement has a right of survivorship. In that case, the ownership interest of a deceased joint tenant does not fall into his estate and goes to the other joint owners.

On the other hand, each tenant in common controls just a portion of the whole property and can sell his share or bequest it to his heirs.

DLegal Lawyers Are Here For You!

Understanding the types of tenancy is essential for estate planning and real estate transactions. But, please, be very cautious with the different kinds of ownership when you own a property with someone else as joint tenants or tenants in common.

If you have any questions or doubts about the joint tenancy or tenancy in common, make sure to discuss it with an estate planning or property lawyer. At the very least, do your research. Being mindful about your ownership rights will protect you today, and your significant ones after you are gone. DLegal estates lawyers are proud of helping Albertans prepare for the future. So, feel free to reach out to our friendly team whenever you need guidance on your property options.

Questions?

The DLegal team is here to support. We will do our best to assist or connect you with those who can help.

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