Purchasing a property is one of the most important decisions people make throughout their lifetime. As is often the case, when two (or more) people are buying a property together, the most important question from a legal perspective is whether the owners will be purchasing as joint tenants or tenants in common.
When purchasers choose to own property as joint tenants, each owner has an invisible interest in the land and each owner has what is called the “right of survivorship”. The right of survivorship means that, on the death of one of the owners, the ownership of the property automatically transfers to the surviving owner(s).
This means that if two individuals own a property as joint tenants and one of them dies, the surviving owner will own the property solely as a result.
Alternatively, if three individuals own a property as joint tenants, and one owner dies, the two surviving owners become the sole owners of the property.
Additionally, joint tenants cannot divvy up percentages of ownership as they agree among themselves, unlike tenants in common.
Tenants in Common
When property is owned as tenants in common, the owners have a divided percentage interest in ownership of the property. Except, however, there is no right of survivorship. In other words, if two owners own a property in equal 50% shares, and one owner dies, the deceased owner’s 50% share passes to their estate and does not automatically transfer to the surviving owner. Therefore, the deceased owner’s share in the property will be dealt with as part of the administration of their estate.
Additionally, the largest advantage of tenancies in common is the ability to assign ownership of the property into different percentages. For example, two owners could divide their ownership of a property into a 70-30 split, whereas joint tenants must share their respective interest equally.
Tenancies in common may give rise to a number of substantive questions pertaining to rights of possession, carrying costs, common areas, mortgages, events of default, among others. These situations would benefit from a comprehensive Co-Ownership Agreement, which our real estate team at HGR Graham Partners would be happy to assist you with.
Severing Joint Tenancies
One of the distinct features of a joint tenancies is the ability of one owner to unilaterally sever their joint ownership in the property. “Severing the joint tenancy” means converting the ownership arrangement to tenants-in-common.
This can be done in three different ways. One is without the consent of the other owner(s) by registering a transfer of their share of the property to someone else or to themselves.
Similarly, a joint tenancy can also be severed through a written agreement between the owners, so long as all owners consent to the severance.
The third method of severing a joint tenancy is what is known as “severance by any course of dealing”. In this case, an analysis of the history of ownership is undertaken to determine whether, despite the wording on the deed/transfer documents, the conduct and mutual intentions of the owners was to treat ownership of the property as tenants in common. This situation is highly contextual and requires the input and advice of a real estate lawyer.
Purchasing a property can be one of the most stressful decisions people make as that property can be one of, if not the largest, asset(s) people own. Accordingly, it is in the best interests of property owners to be fully informed as to their rights in their ownership of the property. As a result, knowing the ramifications of how your ownership in that property is dealt with upon your death is of critical importance.
Our real estate team at HGR Graham Partners is available to advise you in respect of how you choose to co-own a property, be it as joint tenants or tenants in common, and can advise you as to the benefits and burdens of each form of ownership. Please contact us if you have any questions about buying or selling your property.
This article is intended for general information purposes only and is not intended to provide legal advice. Readers with concerns about how this affects particular situations or transactions should obtain the independent review and advice of legal counsel.