Joint Tenancy vs. Tenancy-in-Common

Joint Tenancy vs. Tenancy-in-Common
Joint Tenancy vs. Tenancy-in-Common

Why Co-Own Real Estate?

In short – because adversity makes strange bedfellows. Co-ownership, coupled with careful planning, can minimize the impact of many challenges that clients frequently face in the context of real estate, such as:

  1. Having limited access to financing or buying power;
  2. Risk of loss of investment;
  3. Securing generational wealth; and
  4. Minimizing tax liability.

Owning a property with another person offers benefits which would otherwise be unavailable. Co-ownership can also pose challenges and complications, which is why it is highly recommended that you always discuss it with a lawyer.

This article provides a basic vocabulary which may serve as a springboard in your discussion with your legal professional.

Co-Own Real Estate

Two Types of Co-ownership

Because there are two types of co-ownership, you should always consider which is the better option based on your objectives.

Joint Tenancy describes a type of co-ownership in which each of the owners are entitled to the whole of a property or interest. Most importantly, when one co-owner dies, the surviving co-owner generally becomes the sole owner of the property, free from any claim by the estate of the deceased; this feature of joint tenancy is called a right of survivorship.

Tenancy-in-Common describes a type of co-ownership in which each of the owners own a distinct and separate interest in the property, often expressed in percentages (though not necessary). Because each owner (or Tenant-in-Common) has a separate interest, the survivor does not automatically become the sole owner of the whole property. Instead, the deceased co-owner’s interest is distributed according to their last will or according to intestacy laws, if they do not have a will.

Changing the Type of Co-ownership

Life does not always go according to plan, and the original type of co-ownership may not be the best way to hold a title in the future. Consider, for instance, how loving spouses may originally intend that their home automatically pass to the other in the event of one of their deaths (accomplished via Joint Tenancy). A breakdown of the marriage increases the chance that this is no longer the case, which may warrant changing title to Tenancy-in-Common; this process is called a severance of Joint Tenancy.

Severances can be completed by any one of the owners (with the assistance of a lawyer), without the consent of any other owner. In contrast, changing ownership from Tenancy-in-Common to Joint Tenancy requires the consent of all the parties involved.

Notably, severances can also occur without the consent of either party by virtue of special laws, often resulting in unintended consequences.

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Careful Legal Planning

While deciding on the type of co-ownership is foundational to owning property with another person, it is the absolute bare minimum. You should always consult with a lawyer to guide you through the countless complications, exceptions, and exceptions to exceptions that relate to your scenario.

At Hummingbird Lawyers LLP, our real estate team has vast experience and success with providing legal advice and direction when it comes to planning for co-ownership of property. We take the time to walk you through each step of the process to ensure that you are comfortable with your choices.

Finding experienced and reputable lawyers in Toronto and lawyers in Vaughan is made easy, with Hummingbird Lawyers LLP’s two locations. Choose the location most convenient to you, and our staff are ready to assist you with your legal matters. For more information, please contact Hummingbird’s real estate lawyers. Our team is always available to help.

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Kevin

Kevin Lee joined the Real Estate group at Hummingbird Lawyers LLP in 2021 as an Associate Lawyer.

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