Explaining Tenancy-In-Common & Joint Tenancy

Buying a home is the single most significant financial undertaking most people make in their lifetime. With several terms and definitions being used, first-time homebuyers can easily get confused and frustrated, especially when offers and transactions are happening so quickly.

Associate Lewis Nguyen does not take helping homebuyers lightly and has experience dealing with complex or simple real estate matters. He is especially skilled at explaining legal concepts and processes to clients in a clear manner.

When two or more people purchase a property in British Columbia together, they can own it in one of two ways: Joint Tenancy or Tenancy-In-Common. What to choose? Here are some things to consider when making that decision.

Tenancy-In-Common

Tenancy-In-Common is a form of combined ownership whereby each person owns an undivided share in the property. The shares must add up to 100%. The registered owners can have equal or unequal shares in the property.

Under a Tenancy-In-Common, when one of the registered owners passes away, their share in the property does not “automatically” pass to the other registered owner(s). Instead, that deceased’s share will pass to their beneficiaries in accordance with their Will.

For example, business partners and unrelated people who own property together often decide to own the property as Tenants-in-Common.

Joint Tenancy

Joint Tenancy is another form of combined ownership, whereby all registered owners own the entire property together at the same time. There is no undivided share in the property for one of the registered owners. Accordingly, if one of the registered owners passes away, the survivor(s) will continue to own the entire property. Due to this right of survivorship, there is no transfer of property required to put the property into the survivor’s name. A property owned under a Joint Tenancy would not form part of the deceased’s estate.

Although related individuals who own property together, particularly people in marriages or common-law relationships, usually decide to own the property as Joint Tenants, it is a decision that should not be made so quickly or easily. For example, for people in their second or third marriage, there may be children from their previous marriage/relationship that they must think about when deciding who should acquire their share in the property.

Combination of Joint Tenancy and Tenancy-In-Common

If three or more people are buying a property together, they have another choice besides being just Tenants-in-Common or just Joint Tenants—that is, a combination of the two.

Given the current state of the real estate market, two married couples buying one house together is quite commonplace. You also see it where young first-time homebuying couples have to add their parent(s) on the title for mortgage purposes.

Scenario:

Two couples own property together: Mr. and Mrs. Chan own an undivided 50% share in the home, Mr. and Mrs. Jones own the other undivided 50% share in the home. If the Chans pass away, their 50% share would not “automatically” go to the Joneses, and vice versa.

Mr. and Mrs. Chan own their 50% together as Joint Tenants; if Mr. Chan passes away, Mrs. Chan—as the surviving owner—would own that 50% share solely. This means that when Mrs. Chan was to pass away, her share would go to the beneficiaries according to her Will.

Mr. and Mrs. Jones own their 50% together as Tenants-in-Common, whereby Mr. Jones has an undivided 25% share, and Mrs. Jones has an undivided 25% share. The Jones decided to be Tenants-in-Common because this is their second marriage. They each have children from their past marriages. They do not want their share in the home to “automatically” go to each other—they want their share to go to their children, in accordance with their Will.

Joint Tenancy as a Gift or Trust

With an aging population, more parents are considering transferring their home into a joint tenancy with their children as a means to avoid/minimize the process and cost of probate or administration of the estate. There are many issues to consider before adding one’s children to one’s home, which is beyond the scope of this blog post.

I will note the importance of documenting your intent behind transferring the title to your children, especially when it involves only one child. Under a joint tenancy, that child would be the sole registered owner of that property upon the parents' passing. What about the other children? The potential for abuse/greed exists.

Was the transfer of property into a joint tenancy an actual gift to the child, where the child on the title is not just a registered owner in name only—he or she has an actual beneficial interest in the property? If so, the appropriate deeds of gift should be prepared and executed.

Or was the transfer into joint tenancy for convenience only, where the child’s name may be on the title, but they are holding the property in trust for the parent? If so, then the appropriate trust agreements should be prepared and executed.

Estate Planning

Regardless of whether one decides to own property together as Joint Tenants or Tenants-in-Common, people should still get a will and other estate planning documents done. At some point in time, there will just be one sole owner of that property.

Furthermore, due to relatively recent legislative changes, even under a joint tenancy, where the owners die "simultaneously", the property will be treated as if those owners held it as Tenants-in-Common.

Conclusion

It is not a simple decision to make whether purchasers want to be Joint Tenants or Tenants-In-Common—it should be a decision made after discussing the matter with your realtor, lawyer, estate/financial advisor, and accountant. If you have any questions about this post, please contact Lewis Nguyen at lnguyen@fhplawyers.com or 778-622-3743.