Joint tenancy vs. Tenants in Common
When looking at purchasing a new property, whether as an investment property or a principal residence with a significant other, it is important to know what would happen in the case of an unexpected death. When you go to sign the papers at your lawyers, and there will be more than 1 person on title, you will be asked if you would like to be Joint tenants or Tenants in Common.
Joint tenancy – neither owner has their own divisable share of the property. In this case they both have full possession of the whole land/building. This means that each owner has a “right to survivorship” – if one joint owner passes, their interest in the property is completely dissolved and the surviving owner takes over 100% ownership.
Tenancy in Common – In this case both owners hold rights to their own divisible share of the property. Most often this is 50% each, but can be set at whatever percentage the two or more owners agree to at the time of signing. Each owner has their own share in the property and can do what they want with their share without the consent of the other. If one owner were to pass away, their share in the property will be passed on to the beneficiary in their will.
There are definite advantages and disadvantages to each scenario, but when deciding which is best for you it is important to plan ahead in the case of unexpected death of one of the owners. For example, if the other owner dies in tenants in common scenario, do you know who will be the beneficiary? What happens if the beneficiary decides they want to sell, even if it will be at a loss? Likewise, if you unexpectantly die in a joint tenancy scenario, would you trust that the other owner takes full control of property (including profits) and your wife/husband/children potentially recieve nothing?
Ultimately it is important to discuss all your options with your lawyer before you sign off on possession of a new property to ensure that you protect you and your families best interests in the event of an unexpected death.
