Tenants in Common vs Joint Tenancy

Investing in real estate is a decision that requires careful thought and contemplation regarding issues of ownership and possession. A title is a legal document that identifies one as the rightful owner of the property. One may be the sole owner of the property; couples may opt to hold the title to property as community property wherein both partners have equal interest; or people may choose to establish a trust and transfer the ownership of the property to reduce tax burden. Tenancy in common and joint tenancy are other ways of holding the title to the property.

Tenants in Common vs Joint Tenancy

Tenants in Common
Regardless of their stake in the property, that may be equal or unequal, tenants in common, who are not required by law to be related, have equal rights of possession. In other words, one may occupy the property despite owning the smallest share even in the absence of other co-tenants. Upon death of a co-tenant, the heir inherits the erstwhile co-tenant's share while others maintain their status quo, unless the surviving co-tenants are named in the will, in which case they may inherit the decedent's share. Tenants have the right to buy out co-tenants provided the latter is willing.

The advantage of common tenancy is that every owner can bequeath by will his/her share of the property to a chosen beneficiary.

One of the pitfalls of common tenancy is that the heir, who may not be a surviving co-tenant, may be disinterested in holding on to the property. The remaining co-tenants may object to the property being sold off and force the heir to file a partition action whereby the court is entrusted with the task of distributing the proceeds of the property that is sold as per court orders. Filing a partition action or buying out tenants will result in dissolution of the current arrangement of holding property.

Joint Tenants With Rights of Survivorship
Joint tenancy requires each tenant to have equal interest or ownership in addition to having equal rights of possession. The owners, who receive the title on the same deed and at the same time, have the right to break a joint tenancy, and create a tenancy in common, by selling their share of the property to another individual. Since joint tenancy results in the decedent's share being passed on to the surviving tenants, it involves the right of survivorship. A property, that is held under joint tenancy, cannot be sold without the permission of all the tenants.

The biggest advantage of joint tenancy is that the surviving tenants inherit the property regardless of whether the decedent left a will or died intestate. Joint tenancy can help avoid probate, which is a lengthy and costly process, that may result in survivors struggling to establish their claim. Every will is thoroughly reviewed by a probate court. In case a person dies without a will (intestate), the process becomes even more cumbersome. A joint tenancy can help people avoid the pitfalls of the probate process.

Another feature of joint tenancy is equal responsibility towards discharging loans that have been procured using the property, that is held under joint tenancy, as a collateral.

As far as disadvantages go, a joint tenancy may prove to be a costly mistake in case of broken relationships, both professional and personal, since joint tenancy does not permit one to sell or encumber one's share of the asset without prior permission from the other tenants.

People interested in real estate investment should explore the available options, of procuring the title to the property, by comparing the pros and cons of tenants in common vs joint tenancy.