When more than one purchasers have entered into a Purchase Agreement for a property, your lawyers must ask if the purchasers would like to hold the property as “Joint Tenants” or “Tenants in Common.” Let me briefly explain what Joint Tenancy and Tenancy in Common mean in land law.
Concurrent Joint Ownership of the Whole of Property Rights in Joint Tenancy
In a joint tenancy, the co-owners jointly own the entire share of the property at the same time. There is no delineation as to how large a share of ownership each co-owner has with respect to the property. All the co-owners as “joint tenants” JOINTLY own the whole property at the same time. The ownership of each joint tenant cannot be separated. It would be inaccurate to say that joint tenants have “equal share” of ownership because they jointly own the whole title of the property at the same. Therefore, each joint tenant cannot deal with his "own share” as he or she likes. The property must be sold or transferred jointly by all the joint tenants.
Variation of Share Sizes in Tenancy-in-Common
On the contrary, “tenants in common” can have different sizes of their ownership of the property. For instance, each co-owner may have 50% of the ownership when there are just two tenants in common assuming that they contributed the same amount of money to buy the property. Oftentimes, friends buy properties as their investment properties. A clear delineation of their shares of ownership is needed because the investors' different levels of financial contribution result in different sizes of their respective share of the title. More importantly, each tenant in common can deal with his or her own share as he or she likes. A tenant in common can sell his or her share to someone else or pass it to his or her heir through a will. When a tenancy in common is in place to own a property, the co-owners are recommended to have a co-ownership agreement to set out the roles and responsibilities of each co-owner. Our lawyer can assist you in it.
Right of Survivorship in Joint Tenancy
Furthermore, the most significant characteristic of a joint tenancy is the "right of survivorship." When a joint tenant dies, his ownership automatically passes to the surviving joint tenants. That is why most married couples hold properties as joint tenants. When a spouse dies, the title automatically falls into the hand of the surviving one. This is legally called “right of survivorship.” As a surviving joint tenant, he or she can seek the assistance of a lawyer to make a Survivorship Application to remove the name of the deceased joint tenant so that the surviving joint tenants can easily deal with the property in the future.
To Probate or Not to Probate
Additionally, "joint tenancy" is an excellent estate planning tool that the ownership of the property is not subject to probate when a joint tenant dies because the ownership has already fallen into the hands of the surviving joint tenant (usually the spouse). It is likely to reduce the estate administration tax as well. However, when a tenant in common dies, his or her share of ownership automatically becomes the deceased's estate and is subject to probate.
For further information, please contact us to discuss your ownership structure.