If you’re considering purchasing a property with two or more individuals, you should decide whether you will take ownership as “joint tenants” or as “tenants in common”. These are legal concepts that identify the two different structures of property ownership.

Joint Tenancy

As joint tenants, each owner owns the property wholly, equally and jointly with the other owner(s). If one owner dies, the surviving owner(s) will then own the property by right of survivorship. For example, if A and B are joint tenants and B dies, A will then become the sole owner of the property. Joint tenancy is commonly used by spouses for their matrimonial home as a simple form of estate planning.

Tenancy in Common

As tenants in common, each individual owns a percentage of the ownership and there is no right of survivorship. For example, A owns 40%, B owns 40%, C owns 20%. If A dies, A’s 40% ownership interest becomes an asset of A’s estate. The surviving B and C owners will then need to deal with a new tenant in common (i.e. A’s estate trustee and potentially the beneficiary of A’s estate). This type of ownership may be desired for business partners who are purchasing a property for investment purposes.

There can also be a combination of the two types of ownership, i.e. A owns 98% as a tenant in common and B+C own 2% as a Joint Tenants.

There are a number of issues that may arise between tenants in common. For example, do all owners have the right to use the property? Can a third person who is not an owner live in the property? Is each owner required to a proportionate share of the property taxes, utilities, maintenance, insurance premiums and other carrying costs? Who will make decisions with respect to repairs and maintenance? Can one owner sell his or her factional interest to a third party?  To deal with issues associated with a tenancy in common ownership, each purchaser should consult with their lawyer to negotiate a co-ownership agreement prior to submitting an offer for a purchase.

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