Joint Tenancy vs Tenancy in Common

If you are planning to purchase a property, either with a partner, friend, or family member, you will have to consider whether you want to own the property as joint tenants or tenants in common. This article will differentiate between the two and allow you to understand this important question.

What is Joint Tenancy:

Joint Tenancy is a special form of ownership of property by two people. If you are a joint tenant you share equal ownership of the property and have the equal, undivided right to keep or dispose of the property. Joint tenancies create a Right of Survivorship. This essentially means that if one of the joint tenants passes away, the property passes on to the surviving joint tenant.
Joint tenancies are a popular choice where a property is being purchased together with a relative or someone you are in a relationship with. It can be an advantage because it simplifies beneficial ownership.

What is a Tenancy in Common:

Tenants in common own different shares of the property depending on how much they contributed towards the purchase price or how they decide they wish to split the property. In the event of the death of a party, their share will not transfer to the other tenants, but pass on to their estate. As a result, tenants in common will need to leave a will that determines who the share should pass to.
You can have up to 4 tenants in common, and this form of ownership is usually opted for in cases where the parties do not have a close relationship.
If a tenant decides to sell their share, the consent of all of the tenants is required. If the property is sold, the proceeds are divided between the co-owners based on the percentage share that each one holds.

Joint Tenancy vs Tenancy in Common – which one?

Joint Tenants – Pros & Cons:

There is no requirement for a joint tenancy agreement. Joint tenants have a simple relationship so there is no need for a document that defines it in detail. This can reduce the amount of work involved in the transaction but could be a disadvantage because it doesn’t allow for any variation of unequal ownership.
The right of survivorship – in the event of the death of one of the owners, the property automatically passes to the surviving tenant and becomes entirely their property. It is therefore not required to list it down on a will, as it is an automatic process.
Selling the property requires both parties. If you want to sell a property you’ve purchased as joint tenants, then the transfer needs to be signed by both owners. If mutual consent to sell can’t be established, it may be necessary to obtain a court order. When the sale has gone through the proceeds from the sale will be split equally as both joint tenants have the same equal interest in the property.

Tenants in Common – Pros & Cons:

It is not necessary for tenants in common to have the same equal interest in a property, as there are no strict rules about the size of ownership shares and these can be defined in a way that works for the tenants.
Tenants in common can sell their share of the property to anyone. There are no rules that prevent certain sales.
If a tenant wants to sell their share, they require the signature and consent of all parties. Although tenants in common own a distinct beneficial share of the property, any sale still requires that all the tenants sign the transfer deed. However, writing in an exit clause to the Deed of Trust can make it simpler to force a sale if the parties are not in agreement.
It is advised for tenants in common to draw up a Declaration of Trust. This document is not required by law but is necessary for co-owners who want to ensure transparency when it comes to property ownership. It will also be crucial if the relationship between the property owners breaks down. The declaration will set out the financial interests and responsibilities that each party has in the property.