In many cases, more than one person has the ownership of an asset or a property. Out of all the property ownership types where a more than one person can own a piece of an asset, tenancy in common vs joint tenancy are the most common ones.
This means just one individual does not own the piece of an asset or property; it is shared as a whole.
However, you might feel that tenancy is common vs joint tenancy is similar, given the instances where the property breaks among many people; however, there are some legitimate differences that you must be aware of before getting into such an arrangement.
In this article, I will take you through the major differences between tenancy in common vs joint tenancy, and we will make sure that you are well aware of the two ownership structures.
What Is Tenancy In Common?
A tenancy in common is a legal agreement where two or more parties share their ownership rights over the same piece of asset or property. Each independent owner exercises control over the same or different portions of the whole property, which could be commercial or residential.
The parties are therefore known as Tenants in Common.
However, a tenancy in common does not come with the right of survivorship, which means, upon the death of any one of the tenants, their percentage of the property passes on to a beneficiary and not to the other tenants.
What Is Joint Tenancy?
Joint tenancy is one among the three types of co-ownership options, along with Tenancy in Common and Tenancy by Entirety. Very similar to tenancy in common, joint tenancy refers to the type of tenancy where a piece of property or land is owned by two to multiple partners.
However, a joint tenancy comes with the right of survivorship, which means, upon the death of any of the partners, their portion directly passes on to the other tenants, while the heirs of the deceased will have no right over their property.
Tenancy In Common Vs Joint Tenancy: How It Works?
Now that we know what the two different ownership structures are, let us see what the bases are on which they can be differentiated for you to have a better understanding of the same.
Before we get onto any other types of differentiations, let us go through the working differentiations of the two ownership types.
Tenancy In Common
The partners in a tenancy in common share privileges and interests in all the areas of the property, although each individual owner can share different proportions or percentages of financial share of the property.
You can create a tenancy in common at any given time, and any member can enter into the agreement after the other members have; ready been a part of it. A tenancy in common also allows each partner to borrow or sell against their portion of the ownership.
Joint Tenancy
Joint tenancy is more inclined towards real estate. Two or more parties get together to make a legal agreement with each other through a deed.
The concerned parties may be friends, family, relatives, or even business associates. While purchasing, these parties will therefore choose a joint tenancy, where the deed of the property will therefore name the two owners as joint owners.
In a joint tenancy, both parties have a claim over the land and therefore share the same benefits. If, at any given point, one of the owners decides to rent out or sell the property, according to the deed, both parties are to get 50% of the total profit it brings in.
This ownership also implies that both parties equally have to pay for the property, including property taxes, mortgage payments, maintenance, etc.
Tenancy In Common Vs Joint Tenancy: Right To Survivorship
The most important factor of differentiation you must consider about tenancy in common vs joint tenancy is Right of Survivorship.
A tenancy in common is most famous for not providing the right to survivorship. This means, after the death of any partner, the entirety of their property will pass on to a chosen beneficiary. The other partners then will not have any right over the deceased’s portion of the asset or property.
However, in a joint tenancy, the rules are different.
A joint tenancy offers a right of survivorship. This means if you enter into a joint tenancy agreement with another individual, after their demise, their portion of the property will pass onto you.
This also eliminates the hassle of probate or the need to transfer the portion of the deceased to an estate.
However, you must be aware of the fact that joint tenancy mostly deals with real estate. Therefore, legal implications of joint tenancy with right of survivorship are applicable over a range of assets including business and brokerage accounts.
Dissolving Tenancy In Common Vs Joint Tenancy
While they may seem similar, dissolving a tenancy in common vs joint tenancy is a little different. It is just like the other factors that you probably thought were similar at first.
One may easily break a joint tenancy if one of the owners decides to sell their portion to third parties. This changes the entire arrangement of ownership for all the other parties.
However, a tenancy in common only breaks or dissolves under the following circumstances:
If one or more owners buy out the others.
If the property is sold and the proceeds are hence distributed amongst the tenants.
In case of a partition action, which allows for an heir to sell off their stake. In this scenario, the former owners choose to enter into a joint tenancy through a document if they wish to.
Wrapping Up
A tenancy in common vs joint tenancy may look very familiar. But, there are considerable differences between the both that you must consider before entering either of the agreements.
Although I cannot say which one is better, it totally depends on what you want out of it. It is always better to sit with a professional that can give you expert advice on the ownership structures. Then you can make a concrete decision that you will not regret in the future.
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