Side by Side: Navigating Joint Tenancy vs. Tenancy in Common

When it comes to owning real estate in California, there are two common ways that individuals can hold title to a property: Joint Tenancy and Tenancy in Common. While these terms may sound similar, they have distinct legal implications that can have a significant impact on your rights and obligations as a property owner. One of the main issues to consider when deciding whether to own property as Tenants in Common or Joint Tenants is how each respective owner’s interest will transfer upon death.

JOINT TENANCY

Joint Tenancy is a form of property ownership where two or more individuals own property together and have an undivided interest in the entire property. It is characterized by the “right of survivorship,” meaning that when one owner passes away, that share of the property automatically transfers to the surviving owner(s). Joint Tenancy is commonly used for married couples or family members who want to ensure that the surviving owner(s) will inherit the property without the need for probate. The right of survivorship is a key feature, bypassing the probate process and directly transferring ownership to the surviving joint tenants.

Advantages:

• The property automatically passes to the surviving owners upon the death of one owner, avoiding probate.

• Each “tenant” has an equal share and equal rights to the entire property.

• Simplifies the process of transferring property upon death but only if there are other surviving joint tenants.

Disadvantages:

• Owners cannot pass their share of the property to anyone other than the joint tenants upon death.

• If one owner wants to sell or encumber the property, all owners must agree.

• The property might be at risk if one of the joint tenants faces legal judgments or bankruptcy.

• It does not account for what happens to the property when there is only one remaining tenant (owner).

• The last surviving joint tenants can dispose of the property in any way they want.

TENANCY IN COMMON

Tenants in Common is a way of holding title where two or more individuals own property together, but with separate and distinct shares. Each owner can sell, transfer, or mortgage their share independently. In the event of an owner’s death, that share of the property passes to the decedent heirs or beneficiaries as directed by their estate plan or through intestate succession. Tenancy in Common is often used by business partners, some family members, friends or investors who wish to own property together while maintaining separate control and ownership over their respective shares. Upon the death of an owner, that tenant’s share passes to their heirs or as directed by their estate plan, rather than automatically transferring to the other owners. This allows for more flexibility in estate planning for each individual owner but can create issues when the surviving owner is suddenly co-owner with decedent’s children or other family members.

Advantages:

• Owners can hold unequal shares and can independently control their portion of the property.

• Each owner can sell or encumber their share without needing consent from the others.

• Owners can bequeath their share to anyone in their estate plan.

Disadvantages:

• The property doesn’t automatically transfer to the other owners upon an owner’s death, potentially leading to complicated estate issues.

• Differences in management or investment goals can lead to disputes.

• Any owner can file for a partition action, which can force the sale or division of the property.

• Each owner can sell or encumber their share without needing consent from the others.

CONCLUSION

Whether you own property as Joint Tenants or Tenants in Common is a choice dependent on many factors. You should consult with an attorney specific to your situation when deciding how to hold title.

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