What is a Joint Tenancy?
The most common way for multiple people to hold title to a property is Joint Tenancy. When registering title to a property in Joint Tenancy, each owner’s name appears on title to the property at British Columbia’s Land Titles Office. Each owner is deemed to own “an undivided share” of the property and these owners are, on the face of the property’s title, equal owners.
To further illustrate what Joint Tenancy means, imagine that three people each own the water in a pool. Like the property held in Joint Tenancy, there is no way to separate what water is owned by each owner. While the water is in the pool, you cannot divide the water. All that can be said is that the water in the pool is owned by all three people together.
The characteristic of Joint Tenancy that sets it apart from Tenants in Common is what happens upon the death of one of the co-owners. Joint Tenancy has what is called “the right of survivorship”. It is also known as the “last person standing” form of title. That is to say, when one of the owners on title dies, their name is taken off title and the other owners gain the deceased person’s share. For example, if a husband and wife own property in Joint Tenancy and the husband dies, the husband will be taken off title. When this happens, the wife will continue on as the only person on title of the property. If there are three owners, and one of them dies, then title will be in the name of the two surviving owners, and so on. Joint tenancy is an important tool in estate planning and used the right way can save money on probate fees.
What is Tenants in Common?
Tenants in Common is different than Joint Tenancy in that you actually create separate pieces of ownership in a property. These pieces can have different proportions of ownership attached to them. Unlike joint tenancy, the ownership of the property does not have to be equal. For example, imagine that three friends buy property together. Friend 1, puts in 50% of the money and will pay 50% of the cost. Friends 2 and 3 each put in 25% of the money to buy the property and will be responsible for 25% of the cost. Under Tenants in Common, the registered title to the property can be as follows:
Friend 1: Owns a 50/100th share of the property.
Friend 2: Owns a 25/100th share of the property.
Friend 3: Owns a 25/100th share of the property.
As can be seen, title does not have to be equal between the three owners when title is held as Tenants in Common.
The major difference between Tenants in Common and Joint Tenancy is that under the Tenants in Common regime, one person’s share of the property does not go to the surviving owners. As a person’s share of the property isn’t part of a common, indivisible pool of ownership, but is instead a very defined portion of the property (for example 25/100th), that ownership share passes to a person’s estate upon death. Upon the passing to their estate it will pass to whomever the person deems should get it in their will. So for example, if Friend 3 dies, he/she can pass their share of the property to whomever they want as outlined in their will (their spouse, parent, or Friend 4 who was left out of the deal in the first place).
Clearly, there are big differences between Tenants in Common and Joint Tenancy. When buying a property with someone else (or multiple people), consult a professional who will help determine which type of title will work best in your situation.