Joint Tenancy Vs. Tenants in Common: what's The Difference?

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 occupancy and tenancy in common arrangement. These forms of real residential or commercial property ownership contracts each have advantages and disadvantages depending on your individual requirements and scenarios.

People might select a joint occupancy or tenancy in typical arrangement when they are a married or cohabitating couple, relative, service partners, financial investment partners, or even roomies choosing to own residential or commercial property together. Whatever your factor, discovering the advantages and drawbacks of a joint occupancy vs. occupancy in common agreement will assist direct you through the residential or commercial property ownership procedure.

Note that while the term "occupancy" is used in rental circumstances, in this context it refers to ownership interest in a residential or commercial property. The owners in these plans would be described as joint tenants or occupants in common and are not tenants.

What is joint occupancy?

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

In order to be considered joint occupancy, four conditions should be met:

- The occupants need to acquire the residential or commercial property at the very same time
- Equal residential or commercial property interest by each occupant
- All tenants must obtain the title deed from the same file
- Equal rights of ownership need to be worked out by all tenants

According to Gagan Saini, the director of acquisitions of JiT Homebuyer, a property services and investment company in Metairie, Louisiana, a joint occupancy agreement needs owners to settle on any choices about the residential or commercial property. "This consists of decisions such as when to sell the residential or commercial property, who is responsible for repair and maintenance, and how the profits 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 passes away, the ownership rights automatically move to the remaining owner or owners. For instance, if Bob and Cindy are married, and Bob dies, Cindy will immediately end up being the complete 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 tenancy by unmarried persons, the remaining owner or co-owners would also prevent the probate procedure, although they would need to claim the inherited residential or commercial property as a present.

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

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

Disadvantages of joint tenancy

Perhaps the most substantial drawback of joint tenancy relates to lenders. If among the occupants owes a financial obligation, a creditor has the power to end a joint tenancy even if the other co-owners have nothing to do with that financial obligation. If you are seeking joint tenancy with somebody who has bad credit, substantial financial obligation, or is vulnerable to liability by occupation, you will require to be familiar with these dangers.

If you do not long for your ownership to move automatically to the other owners and would rather it choose to go to your beneficiaries, joint occupancy is also not a great alternative for you.

Another downside of joint tenancy is that if you and the other co-owners can not reach a contract on what to do with the residential or commercial property, you would require to file a lawsuit, described as a partition action. Your co-owners would be needed to react to the partition action, which can be costly and time-consuming.

What is occupancy in typical?

If multiple people hold title under tenancy in common, this indicates that each person can choose to sell their ownership interests in the residential or commercial property at any time. Unlike with joint occupancy, a tenancy in typical agreement permits numerous owners to own different percentages of the whole residential or commercial property. Although one renter might possibly own just 30% of the residential or commercial property while the other owners own 35% each, this does not suggest that specific areas of the residential or commercial property are owned by those holding the bigger ownership portion. The whole residential or commercial property is available to each owner, regardless of portion, which is called concentrated interest.

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

A tenancy in common may also be described as a TIC arrangement. The acronym stands for tenancy in typical.

Advantages of occupancy in typical

Under an occupancy in common title, each owner does not require to have equal shares. So theoretically, one owner could have 25% ownership while the other has 75%.

This kind of joint ownership is perfect for groups of people aiming to share residential or commercial property or couples who, for whatever reason, do not want their share of the residential or commercial property to move instantly to the making it through spouse upon their death. For instance, if a person marries a widow with children, the couple might want 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 via tenancy in common, your share of the residential or commercial property will be dispersed according to your state's probate laws. Under tenancy 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, indicating that theoretically owners could find themselves co-owning residential or commercial property with complete strangers. For example, if three roommates hold title under tenancy in typical and one of the roommates decides to offer their part of the ownership, the remaining two roommates have no say concerning this decision.

Joint occupancy vs. occupancy in common

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

Choosing which ownership works for you

When choosing whether joint occupancy or tenancy in common is more matched for your needs, the very first step is to ensure you understand the differences between both of these co-ownership options. Choosing to own as tenants in typical vs. joint tenancy needs understanding of both options.

According to Troy Robillard of Premiere Plus Real Estate in Fort Myers, Florida, no matter your circumstance, you will require to consider all the advantages and downsides of each structure as well as seek advice from professionals. He states, "Whether you're a married couple, service partners, or financiers, choosing the proper ownership structure needs cautious factor to consider of your goals and choices. Consulting with a lawyer or realty specialist can supply important guidance customized to your unique situations, ensuring you make notified choices that line up with your long-term strategies."

This article is for educational purposes. This content is not legal recommendations, it is the expression of the author and has not been assessed by LegalZoom for precision or changes in the law.