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

Many agree that building lasting wealth is almost impossible without owning real property. Yet, with inflation and other global dynamics, property prices are currently very high. 

However, a person can come together with friends or family to share the costs of owning a property as tenants in common or joint tenants. Two or more people can jointly own assets, such as real estate, real property, bank accounts, financial securities, or vehicles, through these legal arrangements.

What Are Joint Tenants?

Joint tenants are people who come together to own property through a legal ownership structure that gives each interest and rights to the whole property. A joint tenancy must fulfill the following conditions to be legally valid: 

• Time —  All the tenants must acquire the property at the same time;
• Title — The tenants must obtain the legal title through the same document;
• Interest — Each tenant owns the whole interest in the entire property, not just a share; 
• Possession — The tenants are co-owners of the property, with each having the right to use and possess the entire property. 

Joint tenants are entitled to a share of any rent or profits from the property. Distribution of shares may be done equally or by any other agreed arrangement. 

Example of joint tenants 

Consider this scenario. A married couple buys a house. They each intend to have undivided ownership of the property and full rights to use and occupy it. 

As far as property ownership is concerned, the spouses are joint tenants. In case of the death of one spouse:

• The surviving partner automatically becomes the sole owner of the asset;
• The state will not handle the share belonging to the deceased according to a will or intestacy in the case of no will; and
• A grant of representation—a document confirming that the surviving partner is an executor of a will—is not required.

Take a look at Gerald Bauer’s insightful definition of joint tenancy: 

What Are Tenants In Common

Tenants in common are individuals who own a defined share of the same asset. Each tenant can independently sell or borrow against the value of their share of the property. A tenant in common arrangement has the following characteristics:

• The tenants may share an equal or unequal proportion of the ownership interests;
• Each owner is entitled to access and use of the entire property;
• The tenants are not required to take possession at the same time; and
• Individuals may transfer interest in the property at any time while alive or after death through a will. 

Example of tenants in common 

Imagine a group of friends that want to own property jointly. Two scenarios can play out. The friends may choose to raise equal amounts of money to purchase the property, or some friends may pay more than others. 

These friends know that between joint tenants vs. tenants in common, a tenancy in common is the best legal instrument to preserve each individual’s rights to the property based on their share of invested value. 

If any tenant dies, the share owned by the deceased will not automatically pass to the surviving tenants. That claim would be subject to the provisions of the person’s will or rules of intestacy if there is no will. If the deceased left their share of the property to an heir, then the percentage that belonged to the deceased owner will pass to them, and they will own the property jointly with the surviving tenants. Further, a grant of representation will be required to deal with the deceased owner’s share.

Take a look at Gerald Bauer’s example of tenants in common:

Terminating Joint Tenancy vs. Tenancy in Common 

The pathway to termination is one of the most important factors when deciding between tenants in common vs. joint tenants. It is essential to know how easy or difficult it is to terminate or change the terms of a tenancy structure. 

A vital element of terminating a tenancy is having a well-written Tenants in Common Agreement. So, consider downloading Tenants-in-Common Agreement as the first and inevitable step of renting a property together.

How to terminate a joint tenancy 

You can terminate a joint tenancy: 

1. Sale or transfer of tenancy interests — One tenant can terminate a joint tenancy by selling or transferring their claim to a third party, either by gift or sale. The transfer of interest shifts the ownership structure to tenancy in common. Such a transfer does not require the consent of the co-owner. 
2. Agree with the co-owner to terminate — If a person wishes to retain their interests in the property after terminating a joint tenancy, some states require all the co-owners consent to convert the agreement into a tenancy in common.
3. Transfer tenancy interest to oneself — Some states allow tenants to unilaterally transfer their joint tenancy interests to themselves, thereby converting the arrangement to a tenancy in common. In such cases, states like California require the severance to be recorded for the transfer to be valid. Failing to register the severance may reserve the right of survivorship. 
4. Judicial partition—A tenant may seek to terminate a joint tenancy through a judicial partition. If the property is divisible, the court may order its equal division between the co-owners (partition by division). If the property is indivisible, a court may oversee its sale and divide the proceeds according to each tenant’s share of ownership (partition by sale). 

How to terminate a tenancy in common

Though termination rules vary from state to state, a person may terminate a tenancy in common through the following means: 

• Agreement— All the tenants in common can mutually agree to terminate the tenancy by selling or transferring their interests or, if possible, dividing the property according to the shares of each tenant. 
• Judicial partition— The tenants in common may request a court to partition the property so that each can individually hold the value of their share. However, if a court finds it difficult to divide the property according to the shares of each individual, then the court may order a partition by sale. 
• Ouster— If the other tenants wrongfully dispossess one of the tenants in common, the ousting terminates the agreement. 

Pros and Cons of Joint Tenancy vs. Tenancy in Common

Real property can be expensive, but tenants in common and joint tenants ownership structures allow property owners to share the cost with friends or family. 

But which of these two is suitable for you? Decide which structure is ideal by weighing both joint tenants versus tenants in common on the balance of their financial and legal repercussions. 

Consider this insight from Shaun Martin: 

We advise that you think through tenancy in common vs. joint tenancy options with the help of a qualified attorney.

In the meantime, the following are some pointers to guide you as you consider the options.

Joint Tenancy

Joint tenancy results in a legal co-ownership arrangement in which every member fully owns the property. This is suitable for people with life-long commitments and shared goals, such as married couples. On the other hand, a tenancy in common is more suitable for persons in open relationships or those on different life paths, such as friends. 

The pros and cons of a joint tenancy include the following:

Pros 

• If a partner dies, the law automatically transfers their rights to the surviving tenant or tenants; and
• A will cannot assign a deceased person’s interest to an heir or a third party.

We asked Jennifer Spinelli to share the main pros of joint tenancy: 

Cons

• All tenants have equal rights to the property, including the right to occupy and use the property, which can cause chaos if the tenants have different goals for owning the property.

According to Sam Tabak, the possibility of disagreements is a significant disadvantage of joint ownership:

Tenancy in Common

A tenancy in common is beneficial when multiple property owners want to protect their interests individually. Some of the pros and cons of this arrangement include the following: 

Pros

• The tenants can add new members over time to increase the number of investors;
• A modest share grants owners access to leverage an entire property; and
• Owners can transfer and liquidate their shares without the consent of the other tenants.

Take time to consider these other pros from Jennifer Spinelli:

Cons

• A member who suddenly liquidates or transfers their shares to a new investor can create unforeseen dynamics;
• Heirs can affect the investment objectives of the remaining tenants; and 
• Tenants may not meet their financial obligations, putting the entire property at risk. 

Right of Survivorship

Now, let’s consider tenants in common vs joint tenants with rights of survivorship. It is important to note that the right of survivorship only applies to joint tenants. The right of survivorship under joint tenancy recognizes that each co-owner has an independent interest in the whole property. Therefore, the right guarantees that if one co-owner dies, their claim will transfer to the surviving co-owner. 

Final Thoughts

The right of survivorship is the main distinguishing factor between co-tenants vs. joint tenancy arrangements. Are your goals and objectives so aligned with your co-owners that you are sure they will stick to them even after your death? Whatever the answer, now you know a bit more about tenancy in common vs. joint tenancy to help you decide which arrangement is best for you.