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

Get assurance with a comprehensive estate strategy

Excellent

Jenn Morson

Contents

There are a number of methods to own residential or commercial property with another person. Two methods to hold title together are joint tenancy and occupancy in common arrangement. These types of real residential or commercial property ownership contracts each have benefits and drawbacks depending on your individual needs and scenarios.

People may pick a joint tenancy or occupancy in common agreement when they are a married or cohabitating couple, member of the family, service partners, financial investment partners, or even roomies selecting to own residential or commercial property together. Whatever your factor, finding out the advantages and drawbacks of a joint occupancy vs. occupancy in common agreement will help assist you through the residential or commercial property ownership process.

Note that while the term "occupancy" is utilized in rental situations, in this context it describes ownership interest in a residential or commercial property. The owners in these arrangements would be described as joint renters or occupants in typical and are not occupants.

What is joint tenancy?

When 2 or more people purchase a residential or commercial property together with equivalent interest in the residential or commercial property and equivalent rights, this is described as joint occupancy. Perhaps the most common form of joint tenancy ownership is that of a couple.

In order to be considered joint occupancy, four conditions must be fulfilled:

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

• Equal residential or commercial property interest by each tenant
• All renters need to obtain the title deed from the 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 realty options and investment firm in Metairie, Louisiana, a joint tenancy arrangement needs owners to settle on any choices about the residential or commercial property. "This includes decisions such as when to sell the residential or commercial property, who is accountable for upkeep and repair work, and how the profits from the sale of the residential or commercial property are divided," Saini states.
  
  Advantages of joint tenancy
  
  When you hold title in a joint tenancy, if one of the co-owners dies, the ownership rights immediately transfer to the staying owner or owners. For instance, if Bob and Cindy are married, and Bob dies, Cindy will automatically end up being the full owner of the residential or commercial property. There will be no requirement 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 persons, the remaining owner or co-owners would also prevent the probate process, although they would require 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 tenancy assurances equal rights and ownership for all celebrations. So if two people own the residential or commercial property, each controls 50%. If there were five owners, each would control 20% interest in the residential or commercial property.
  
  Disadvantages of joint occupancy
  
  Perhaps the most significant disadvantage of joint occupancy relates to creditors. If among the occupants owes a debt, a financial institution has the power to terminate a joint tenancy even if the other co-owners have nothing to do with that debt. If you are seeking joint tenancy with someone who has bad credit, significant financial obligation, or is vulnerable to liability by occupation, you will need to be mindful of these risks.
  
  If you do not long for your ownership to move immediately to the other owners and would instead it choose to go to your successors, joint tenancy is likewise not a great alternative for you.
  
  Another drawback of joint tenancy 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 require 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 typical?
  
  If several individuals hold title under tenancy in typical, this means that each person can choose to sell their ownership interests in the residential or commercial property at any time. Unlike with joint tenancy, an occupancy in common agreement permits for several owners to own different portions of the whole residential or commercial property. Although one occupant could potentially own simply 30% of the residential or commercial property while the other owners own 35% each, this does not mean that specific areas of the residential or commercial property are owned by those holding the bigger ownership portion. The whole residential or commercial property is readily available to each owner, no matter portion, which is called undistracted interest.
  
  Additionally, on the celebration of their death, each co-owner might pick who will be the beneficiary of their ownership as part of their estate.
  
  A tenancy in typical may likewise be referred to as a TIC contract. The acronym represents tenancy in common.
  
  Advantages of occupancy in common
  
  Under an occupancy in typical title, each owner does not require to have equivalent shares. So in theory, one owner might have 25% ownership while the other has 75%.
  
  This type of joint ownership is perfect for groups of people seeking to share residential or commercial property or married couples who, for whatever factor, do not want their share of the residential or commercial property to transfer automatically to the enduring partner upon their death. For instance, if an individual weds a widow with kids, the couple might want to collectively own residential or commercial property through tenancy in typical so that the widow can leave her share of the residential or commercial property to her kids rather of her partner.
  
  Disadvantages of occupancy in typical
  
  If you do not have a will and hold title by means of occupancy in common, your share of the residential or commercial property will be distributed according to your state's probate laws. Under occupancy in common, there is no right of survivorship.
  
  If you share ownership through an in common title, your co-owners can sell their portion without your say, meaning that in theory owners could find themselves co-owning residential or commercial property with complete strangers. For instance, if three roomies hold title under occupancy in typical and among the roomies decides to offer their part of the ownership, the remaining two roommates have no say regarding this decision.
  
  Joint occupancy vs. tenancy in typical
  
  The key distinctions between these 2 alternatives for residential or commercial property ownership are:
  
  Choosing which ownership works for you
  
  When deciding whether joint tenancy or occupancy in typical is more matched for your needs, the initial step is to make sure you comprehend the differences between both of these co-ownership choices. Choosing to own as occupants in typical vs. joint occupancy requires knowledge of both choices.
  
  According to Troy Robillard of Premiere Plus Real Estate in Fort Myers, Florida, no matter your scenario, you will need to think about all the advantages and downsides of each structure as well as speak with professionals. He says, "Whether you're a couple, company partners, or investors, selecting the proper ownership structure requires cautious consideration of your goals and preferences. Consulting with a lawyer or property specialist can supply important assistance tailored to your special scenarios, ensuring you make notified choices that line up with your long-term plans."
  
  This article is for informational functions. This material is illegal advice, it is the expression of the author and has not been examined by LegalZoom for accuracy or modifications in the law.
  
  You may also like
  
  Company
  
  About.
  Careers.
  Contact.
  Investors.
  Press.
  Partner with us.
  Support
  
  Order status.
  Customer Care.
  Consult with an attorney.
  Join our lawyer network.
  Security.
  Find out more
  
  Business & Legal help resources.
  Business Name Generator.
  Legal type 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 Find Out if a Service Name is Taken?
  © LegalZoom.com, Inc. All rights reserved.
  
  LegalZoom provides access to independent attorneys and self-service tools. LegalZoom is not a law company and does not offer legal advice, other than where authorized through its subsidiary law office LZ Legal Services, LLC. Use of our services and products is governed by our Regards to Use and Privacy Policy.
  subdomainz.com