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

Get assurance with a thorough estate strategy

Excellent

Jenn Morson

Contents

There are numerous methods to own residential or commercial property with another individual. Two methods to hold title together are joint tenancy and tenancy in common contract. These forms of real residential or commercial property ownership agreements each have advantages and drawbacks depending upon your specific needs and circumstances.

People may pick a joint occupancy or occupancy in typical arrangement when they are a married or cohabitating couple, family members, service partners, financial investment partners, or even roomies picking to own residential or commercial property together. Whatever your factor, discovering the benefits and disadvantages of a joint occupancy vs. occupancy in common arrangement will assist direct you through the residential or commercial property ownership process.

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

What is joint occupancy?

When two or more individuals purchase a residential or commercial property together with equal interest in the residential or commercial property and equal rights, this is described as joint tenancy. Perhaps the most common kind of joint occupancy ownership is that of a couple.

In order to be considered joint occupancy, 4 conditions need to be satisfied:

- The tenants need to acquire the residential or commercial property at the exact same time

• Equal residential or commercial property interest by each renter
• All renters must obtain the title deed from the exact same document
• Equal rights of ownership must be worked out by all occupants
  
  According to Gagan Saini, the director of acquisitions of JiT Homebuyer, a property options and financial investment firm in Metairie, Louisiana, a joint tenancy contract requires owners to settle on any choices about the residential or commercial property. "This consists of choices such as when to sell the residential or commercial property, who is accountable for upkeep and repair work, and how the revenues from the sale of the residential or commercial property are divided," Saini says.
  
  Advantages of joint occupancy
  
  When you hold title in a joint tenancy, if among the co-owners dies, the ownership rights immediately move to the staying owner or owners. For example, if Bob and Cindy are married, and Bob passes away, Cindy will instantly end up being the full owner of the residential or commercial property. There will be no need 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 individuals, the remaining owner or co-owners would likewise avoid the probate process, although they would need to declare the inherited residential or commercial property as a present.
  
  The automatic transfer of ownership to your co-owners, as described above, is referred to as the right of survivorship.
  
  Additionally, joint occupancy warranties equal rights and ownership for all celebrations. So if 2 people own the residential or commercial property, each controls 50%. If there were 5 owners, each would control 20% interest in the residential or commercial property.
  
  Disadvantages of joint occupancy
  
  Perhaps the most considerable downside of joint occupancy relates to creditors. If among the renters owes a financial obligation, a lender has the power to terminate a joint tenancy even if the other co-owners have absolutely nothing to do with that financial obligation. If you are seeking joint occupancy with someone who has bad credit, significant financial obligation, or is vulnerable to liability by occupation, you will need to be knowledgeable about these dangers.
  
  If you do not want your ownership to move automatically to the other owners and would rather it choose to go to your beneficiaries, joint occupancy is also not an option for you.
  
  Another disadvantage of joint occupancy is that if you and the other co-owners can not reach an agreement on what to do with the residential or commercial property, you would need to file a claim, described as a partition action. Your co-owners would be needed to react to the partition action, which can be costly and time-consuming.
  
  What is occupancy in common?
  
  If multiple people hold title under tenancy in typical, this implies that each person can pick to offer their ownership interests in the residential or commercial property at any time. Unlike with joint occupancy, a tenancy in common agreement permits several owners to own different portions of the entire residential or commercial property. Although one tenant might potentially own just 30% of the residential or commercial property while the other owners own 35% each, this does not indicate that specific locations of the residential or commercial property are owned by those holding the bigger ownership portion. The entire residential or commercial property is available to each owner, regardless of percentage, and that is called undistracted interest.
  
  Additionally, on the event of their death, each co-owner may pick who will be the recipient of their ownership as part of their estate.
  myplace.co.nz
  A tenancy in common may also be referred to as a TIC agreement. The acronym represents occupancy in typical.
  
  Advantages of occupancy in typical
  
  Under a tenancy in common title, each owner does not require to have equivalent shares. So theoretically, one owner might have 25% ownership while the other has 75%.
  
  This kind of joint ownership is ideal for groups of individuals seeking to share residential or commercial property or married couples who, for whatever reason, do not wish their share of the residential or commercial property to transfer instantly to the surviving spouse upon their death. For instance, 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 children rather of her spouse.
  
  Disadvantages of occupancy in typical
  
  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 tenancy 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, suggesting that theoretically owners might discover themselves co-owning residential or commercial property with complete strangers. For example, if 3 roomies hold title under tenancy in typical and among the roomies chooses to offer their part of the ownership, the staying 2 roomies have no say concerning this choice.
  
  Joint tenancy vs. occupancy in typical
  
  The crucial differences between these 2 choices for residential or commercial property ownership are:
  landequity.co.nz
  Choosing which ownership works for you
  
  When deciding whether joint occupancy or occupancy in common is more fit for your requirements, the primary step is to make sure you comprehend the distinctions between both of these co-ownership options. Choosing to own as renters in common vs. joint tenancy requires understanding of both choices.
  
  According to Troy Robillard of Premiere Plus Real Estate in Fort Myers, Florida, no matter your situation, you will require to consider all the benefits and drawbacks of each structure as well as consult experts. He says, "Whether you're a married couple, organization partners, or financiers, selecting the suitable ownership structure requires careful consideration of your goals and preferences. Consulting with an attorney or realty specialist can supply important guidance tailored to your special scenarios, ensuring you make informed choices that line up with your long-lasting plans."
  
  This article is for informative purposes. This material is not legal advice, it is the expression of the author and has not been assessed by LegalZoom for accuracy or modifications in the law.
  
  You may likewise like
  
  Company
  
  About.
  Careers.
  Contact.
  Investors.
  Press.
  Partner with us.
  Support
  
  Order status.
  Customer Care.
  Talk with a lawyer.
  Join our lawyer network.
  Security.
  Discover more
  
  Business & Legal help resources.
  Business Name Generator.
  Legal form design templates.
  What is an LLC?
  How to Start an LLC?
  How to Change Your Name.
  What is a DBA?
  Most Profitable Small Business Ideas.
  What Is a Registered Agent?
  How to Conduct a Hallmark Search.
  How to Learn if a Business Name is Taken?
  © LegalZoom.com, Inc. All rights booked.
  
  LegalZoom provides access to independent lawyers and self-service tools. LegalZoom is not a law practice and does not offer legal recommendations, other than where authorized through its subsidiary law practice LZ Legal Services, LLC. Use of our products and services is governed by our Terms of Use and Privacy Policy.