Joint Tenancy vs. Tenants in Common: What's the Difference?

Get peace of mind with a detailed estate plan

Excellent

Jenn Morson

Contents

There are several methods to own residential or commercial property with another person. Two methods to hold title together are joint tenancy and tenancy in common agreement. These forms of genuine residential or commercial property ownership arrangements each have benefits and drawbacks depending on your individual needs and situations.

People might select a joint tenancy or occupancy in typical contract when they are a married or cohabitating couple, household members, organization partners, financial investment partners, or perhaps roommates picking to own residential or commercial property together. Whatever your factor, discovering the benefits and drawbacks of a joint occupancy vs. occupancy in common agreement will help assist you through the residential or commercial property ownership procedure.

Note that while the term "tenancy" is used in rental scenarios, in this context it refers to ownership interest in a residential or commercial property. The owners in these plans would be described as joint tenants or tenants in common and are not renters.

What is joint occupancy?

When 2 or more individuals buy a residential or commercial property together with equal interest in the residential or commercial property and equal rights, this is referred to as joint tenancy. Perhaps the most typical type of joint tenancy ownership is that of a married couple.

In order to be thought about joint tenancy, four conditions need to be fulfilled:

- The renters should obtain the residential or commercial property at the same time

• Equal residential or commercial property interest by each occupant
• All tenants need to acquire the title deed from the same file
• Equal rights of ownership need to be worked out by all occupants
  
  According to Gagan Saini, the director of acquisitions of JiT Homebuyer, a realty services and investment firm in Metairie, Louisiana, a joint occupancy arrangement needs owners to settle on any decisions about the residential or commercial property. "This includes decisions such as when to offer the residential or commercial property, who is accountable for maintenance and repair work, and how the make money from the sale of the residential or commercial property are divided," Saini says.
  
  Advantages of joint tenancy
  
  When you hold title in a joint tenancy, if among the co-owners dies, the ownership rights instantly move to the remaining owner or owners. For instance, if Bob and Cindy are married, and Bob passes away, Cindy will automatically become the full owner of the residential or commercial property. There will be no requirement to go to probate, and Cindy will not owe any transfer taxes. If the residential or commercial property were owned in joint occupancy by unmarried persons, the remaining owner or co-owners would also avoid the probate procedure, although they would need to claim the acquired residential or commercial property as a present.
  
  The automated transfer of ownership to your co-owners, as described above, is referred to as the right of survivorship.
  
  Additionally, joint tenancy guarantees equal rights and ownership for all parties. So if 2 people own the residential or commercial property, each controls 50%. If there were five owners, each would control 20% interest in the residential or commercial property.
  
  Disadvantages of joint tenancy
  
  Perhaps the most considerable drawback of joint tenancy associates with lenders. If among the tenants owes a financial obligation, a creditor has the power to end a joint occupancy even if the other co-owners have nothing to do with that financial obligation. If you are looking for joint tenancy with somebody who has bad credit, significant financial obligation, or is susceptible to liability by profession, you will require to be conscious of these risks.
  
  If you do not long for your ownership to to the other owners and would instead it choose to go to your successors, joint tenancy is likewise not a good choice for you.
  
  Another disadvantage of joint occupancy is that if you and the other co-owners can not reach an arrangement on what to do with the residential or commercial property, you would need to file a suit, referred to as a partition action. Your co-owners would be required to react to the partition action, which can be costly and lengthy.
  
  What is occupancy in typical?
  
  If numerous people hold title under occupancy in typical, this suggests that each person can select to offer their ownership interests in the residential or commercial property at any time. Unlike with joint tenancy, a tenancy in typical agreement permits several owners to own different percentages of the whole residential or commercial property. Although one renter might potentially own simply 30% of the residential or commercial property while the other owners own 35% each, this does not indicate that specific areas of the residential or commercial property are owned by those holding the larger ownership percentage. The whole residential or commercial property is offered to each owner, regardless of percentage, which is called undivided interest.
  
  Additionally, on the celebration of their death, each co-owner may choose who will be the recipient of their ownership as part of their estate.
  
  An occupancy in common might also be referred to as a TIC agreement. The acronym stands for occupancy in typical.
  
  Advantages of tenancy in common
  
  Under an occupancy in common title, each owner does not require to have equal shares. So in theory, one owner could have 25% ownership while the other has 75%.
  
  This type of joint ownership is ideal for groups of individuals looking to share residential or commercial property or couples who, for whatever factor, do not want their share of the residential or commercial property to transfer instantly to the enduring partner upon their death. For example, if an individual weds a widow with children, the couple might wish to collectively own residential or commercial property through occupancy in typical so that the widow can leave her share of the residential or commercial property to her kids instead of her spouse.
  
  Disadvantages of tenancy in common
  
  If you do not have a will and hold title through tenancy in common, your share of the residential or commercial property will be dispersed according to your state's probate laws. Under occupancy in typical, there is no right of survivorship.
  
  If you share ownership through an occupancy in typical title, your co-owners can sell their portion without your say, meaning that in theory owners could discover themselves co-owning residential or commercial property with complete strangers. For example, if 3 roommates hold title under occupancy in typical and among the roommates chooses to sell their part of the ownership, the staying 2 roomies have no say concerning this decision.
  
  Joint tenancy vs. occupancy in typical
  
  The key differences in between these 2 alternatives for residential or commercial property ownership are:
  
  Choosing which ownership works for you
  
  When deciding whether joint occupancy or tenancy in common is more fit for your requirements, the initial step is to ensure you comprehend the distinctions in between both of these co-ownership alternatives. Choosing to own as tenants in common vs. joint occupancy needs knowledge of both options.
  
  According to Troy Robillard of Premiere Plus Real Estate in Fort Myers, Florida, no matter your circumstance, you will require to consider all the advantages and disadvantages of each structure as well as consult professionals. He states, "Whether you're a couple, service partners, or investors, choosing the appropriate ownership structure needs cautious factor to consider of your objectives and choices. Consulting with a legal professional or realty expert can supply invaluable guidance customized to your unique scenarios, ensuring you make notified decisions that line up with your long-term strategies."
  
  This short article is for informational purposes. This material is illegal guidance, it is the expression of the author and has not been examined by LegalZoom for accuracy or changes in the law.
  
  You may also like
  
  Company
  
  About.
  Careers.
  Contact.
  Investors.
  Press.
  Partner with us.
  Support
  
  Order status.
  Customer Care.
  Consult with an attorney.
  Join our attorney network.
  Security.
  Discover more
  airbnb.com
  Business & Legal help resources.
  Business Name Generator.
  Legal form templates.
  What is an LLC?
  How to Start an LLC?
  How to Change Your Name.
  What is a DBA?
  Most Profitable Small Company Ideas.
  What Is a Registered Agent?
  How to Conduct a Trademark Search.
  How to Find Out if an Organization Name is Taken?
  © LegalZoom.com, Inc. All rights reserved.
  
  LegalZoom offers access to independent lawyers and self-service tools. LegalZoom is not a law company and does not provide legal guidance, other than where authorized through its subsidiary law practice LZ Legal Services, LLC. Use of our services and products is governed by our Terms of Use and Privacy Policy.