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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 numerous ways to own residential or commercial property with another person. Two ways to hold title together are joint tenancy and occupancy in common arrangement. These forms of real residential or commercial property ownership contracts each have benefits and drawbacks depending upon your specific needs and situations.

People might choose a joint tenancy or occupancy in common contract when they are a married or cohabitating couple, member of the family, organization partners, financial investment partners, or even roomies selecting to own residential or commercial property together. Whatever your reason, discovering the benefits and downsides of a joint tenancy vs. tenancy in typical agreement will assist direct you through the residential or commercial property ownership procedure.

Note that while the term "tenancy" is used in rental scenarios, in this context it describes ownership interest in a residential or commercial property. The owners in these arrangements would be described as joint tenants or tenants in typical and are not tenants.

What is joint tenancy?

When 2 or more individuals buy a residential or commercial property together with equal interest in the residential or commercial property and equal rights, this is referred to as joint tenancy. Perhaps the most common form of joint occupancy ownership is that of a married couple.

In order to be considered joint occupancy, 4 conditions need to be satisfied:

- The occupants need to acquire the residential or commercial property at the same time

Equal residential or commercial property interest by each renter
All occupants should acquire the title deed from the exact same document
Equal rights of ownership should be exercised by all occupants

According to Gagan Saini, the director of acquisitions of JiT Homebuyer, a realty services and investment firm in Metairie, Louisiana, a joint occupancy arrangement needs owners to settle on any choices about the residential or commercial property. "This includes choices such as when to sell the residential or commercial property, who is accountable for repair and maintenance, and how the benefit from the sale of the residential or commercial property are divided," Saini states.

Advantages of joint tenancy

When you hold title in a joint occupancy, if among the co-owners dies, the ownership rights automatically move to the staying owner or owners. For instance, if Bob and Cindy are married, and Bob dies, Cindy will immediately end up being 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 occupancy by single individuals, the staying owner or co-owners would likewise avoid the probate procedure, although they would require to claim the inherited residential or commercial property as a gift.

The automated transfer of ownership to your co-owners, as outlined above, is described as the right of survivorship.

Additionally, joint tenancy assurances equal rights and ownership for all parties. So if 2 individuals own the residential or commercial property, each controls 50%. If there were five owners, each would manage 20% interest in the residential or commercial property.

Disadvantages of joint tenancy

Perhaps the most substantial drawback of joint tenancy associates with creditors. If one of the renters owes a financial obligation, a creditor has the power to end a joint occupancy even if the other co-owners have absolutely nothing to do with that debt. If you are seeking joint occupancy with somebody who has bad credit, substantial debt, or is prone to liability by occupation, you will require to be knowledgeable about these risks.

If you do not long for your ownership to move immediately to the other owners and would rather it choose to go to your successors, joint occupancy is likewise not an excellent option for you.

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

What is tenancy in common?

If numerous people hold title under occupancy in typical, this means that each can pick to offer their ownership interests in the residential or commercial property at any time. Unlike with joint occupancy, an occupancy in common contract enables numerous owners to own various portions of the whole residential or commercial property. Although one renter could possibly own simply 30% of the residential or commercial property while the other owners own 35% each, this does not imply that specific locations of the residential or commercial property are owned by those holding the larger ownership portion. The whole residential or commercial property is readily available to each owner, regardless of portion, which is called concentrated interest.

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

A tenancy in common might also be described as a TIC contract. The acronym stands for occupancy in common.

Advantages of tenancy in common

Under a tenancy in typical 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 ideal for groups of people wanting to share residential or commercial property or married couples who, for whatever reason, do not wish their share of the residential or commercial property to transfer automatically to the surviving spouse upon their death. For instance, if an individual weds a widow with kids, the couple might wish to jointly own residential or commercial property through occupancy in common so that the widow can leave her share of the residential or commercial property to her kids instead of her partner.

Disadvantages of occupancy in typical

If you do not have a will and hold title through occupancy in typical, your share of the residential or commercial property will be distributed according to your state's probate laws. Under occupancy in typical, there is no right of survivorship.

If you share ownership through a tenancy in common title, your co-owners can sell their portion without your say, implying that theoretically owners might discover themselves co-owning residential or commercial property with complete strangers. For example, if 3 roommates hold title under occupancy in typical and one of the roomies chooses to offer their part of the ownership, the remaining 2 roomies have no say concerning this decision.

Joint tenancy vs. tenancy in typical

The crucial distinctions in between these 2 alternatives for residential or commercial property ownership are:

Choosing which ownership works for you

When deciding whether joint occupancy or occupancy in typical is more suited for your requirements, the primary step is to make certain you understand the distinctions between both of these co-ownership choices. Choosing to own as occupants in common vs. joint occupancy needs understanding of both options.

According to Troy Robillard of Premiere Plus Real Estate in Fort Myers, Florida, no matter your scenario, you will need to consider all the benefits and drawbacks of each structure in addition to speak with professionals. He says, "Whether you're a married couple, company partners, or financiers, choosing the suitable ownership structure needs cautious consideration of your objectives and choices. Consulting with an attorney or property professional can provide important guidance tailored to your unique circumstances, ensuring you make notified decisions that line up with your long-lasting plans."

This article is for informative purposes. This content is illegal advice, it is the expression of the author and has not been evaluated by LegalZoom for precision or modifications in the law.

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