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

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Jenn Morson

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There are several ways to own residential or commercial property with another individual. Two ways to hold title together are joint occupancy and tenancy in common contract. These forms of real residential or commercial property ownership arrangements each have advantages and downsides depending on your private requirements and circumstances.

People might pick a joint occupancy or tenancy in typical arrangement when they are a married or cohabitating couple, household members, service partners, investment partners, or perhaps roommates picking to own residential or commercial property together. Whatever your reason, finding out the advantages and drawbacks of a joint occupancy vs. occupancy in common agreement will assist guide you through the residential or commercial property ownership process.

Note that while the term "tenancy" is used in rental scenarios, in this context it refers to ownership interest in a residential or commercial property. The owners in these plans would be described as joint tenants 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 tenancy. Perhaps the most common type of joint tenancy ownership is that of a couple.

In order to be considered joint tenancy, four conditions should be satisfied:

- The should get the residential or commercial property at the very same time

Equal residential or commercial property interest by each tenant
All renters should get the title deed from the exact same document
Equal rights of ownership should be worked out by all renters

According to Gagan Saini, the director of acquisitions of JiT Homebuyer, a real estate solutions and investment firm in Metairie, Louisiana, a joint tenancy agreement requires owners to concur on any choices about the residential or commercial property. "This consists of choices such as when to sell the residential or commercial property, who is responsible for repair and maintenance, and how the make money from the sale of the residential or commercial property are divided," Saini says.

Advantages of joint occupancy

When you hold title in a joint tenancy, if one of the co-owners dies, the ownership rights automatically move to the remaining owner or owners. For instance, if Bob and Cindy are married, and Bob passes away, Cindy will automatically become the full owner of the residential or commercial property. There will be no need to go to probate, and Cindy will not owe any transfer taxes. If the residential or commercial property were owned in joint tenancy by unmarried individuals, the staying owner or co-owners would also prevent the probate procedure, although they would need to claim the acquired residential or commercial property as a present.

The automatic transfer of ownership to your co-owners, as laid out above, is referred to as the right of survivorship.

Additionally, joint occupancy warranties equal rights and ownership for all parties. So if two individuals own the residential or commercial property, each controls 50%. If there were 5 owners, each would control 20% interest in the residential or commercial property.

Disadvantages of joint occupancy

Perhaps the most substantial downside of joint occupancy associates with creditors. If one of the tenants owes a financial obligation, a financial institution has the power to end a joint occupancy even if the other co-owners have absolutely nothing to do with that financial obligation. If you are looking for joint occupancy with somebody who has bad credit, considerable financial obligation, or is susceptible to liability by occupation, you will need to be conscious of these risks.

If you do not long for your ownership to move automatically to the other owners and would rather it choose to go to your heirs, joint tenancy is also not a great option for you.

Another downside of joint occupancy is that if you and the other co-owners can not reach a contract on what to do with the residential or commercial property, you would require to submit a claim, described as a partition action. Your co-owners would be required to respond to the partition action, which can be expensive and lengthy.

What is tenancy in typical?

If several people hold title under tenancy in common, this means that each individual can pick to offer their ownership interests in the residential or commercial property at any time. Unlike with joint occupancy, a tenancy in typical agreement permits numerous owners to own various portions of the entire residential or commercial property. Although one renter might possibly own just 30% of the residential or commercial property while the other owners own 35% each, this does not suggest that specific areas of the residential or commercial property are owned by those holding the bigger ownership percentage. The whole residential or commercial property is offered to each owner, regardless of percentage, and that is called concentrated interest.

Additionally, on the occasion of their death, each co-owner may choose who will be the recipient of their ownership as part of their estate.

An occupancy in common might also be described as a TIC agreement. The acronym represents occupancy in common.

Advantages of occupancy in typical

Under an occupancy in common title, each owner does not require to have equal shares. So theoretically, one owner might have 25% ownership while the other has 75%.

This kind of joint ownership is perfect for groups of people aiming to share residential or commercial property or couples who, for whatever factor, do not wish their share of the residential or commercial property to move immediately to the making it through spouse upon their death. For example, if a person weds a widow with children, the couple may want to collectively own residential or commercial property through occupancy in typical so that the widow can leave her share of the residential or commercial property to her kids instead of her spouse.

Disadvantages of tenancy in common

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 dispersed according to your state's probate laws. Under tenancy in common, there is no right of survivorship.

If you share ownership through an occupancy in common title, your co-owners can offer their portion without your say, implying that in theory owners could find themselves co-owning residential or commercial property with total strangers. For instance, if 3 roommates hold title under occupancy in typical and among the roommates decides to sell their part of the ownership, the staying two roommates have no say regarding this decision.

Joint occupancy vs. tenancy in typical

The crucial differences between these 2 choices for residential or commercial property ownership are:

Choosing which ownership works for you

When deciding whether joint occupancy or tenancy in common is more suited for your needs, the initial step is to make certain you understand the differences between both of these co-ownership choices. Choosing to own as renters in common vs. joint occupancy needs understanding 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 drawbacks of each structure along with speak with professionals. He states, "Whether you're a couple, organization partners, or investors, selecting the appropriate ownership structure needs careful factor to consider of your objectives and preferences. Consulting with a legal expert or realty specialist can offer invaluable guidance tailored to your distinct scenarios, ensuring you make notified decisions that align with your long-term plans."

This article is for informational purposes. This material is not legal guidance, it is the expression of the author and has not been evaluated by LegalZoom for accuracy or changes in the law.

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