Important takeouts:
A joint tenant is a legal arrangement between two or more individuals who own the property together. A joint tenant is only valid if there are four unities. It’s a unification of title, time, interest and ownership. Selling shares in a joint tenant allows you to cut off the joint tenant and convert it into a common tenant.
Buying a home is an important life event, and for many, it is a journey taken with others. There are several ways to jointly hold property, but one common way is to joint tenants. It is important for those considering joint tenants and how it works, especially for those considering joint ownership, because of their clear implications for ownership and inherited property.
This Redfin Real Estate Article will help you explore the inside and outside of your joint tenant and determine whether it is a suitable choice for your joint ownership aspirations. Now, let’s get started.
What are joint tenants and how do they work?
A joint tenant is a legal arrangement in which two or more individuals own the property together, and each owner has an equal and undivided interest in the entire property. A critical feature of joint leasehold rights is the “right to survival.” This means that upon the death of one co-tenant, their share of the property will automatically move to the co-tenant where it is alive, bypassing the probate process and the provisions of the will.
What enable joint tenants?
There must be four unity to effectively form a joint tenant.
Title Uniform: All joint tenants must earn interest through the same certificate or means. Time unification: All joint tenants must simultaneously acquire their profits. Interested unity: All joint tenants must have the same interest in equal share and real estate. For example, if you have two joint tenants, each owns 50%. Uniform ownership: All joint tenants have an equal right to own and use the entire property.
If any of these unity is broken, the joint tenancy could be converted into a common tenant, which has a different meaning for ownership and inheritance.
How ownership is affected
In a joint tenant, each joint owner has an equal interest in the real estate, regardless of its financial contribution. This means that if two people own a home as a joint tenant, each owns 100%, not 50%, respectively. This concept of undivided interest is important. Each joint tenant has the right to enjoy using the entire property.
The most important effect on ownership in joint leaseholds is the right to survival. When one co-tenant dies, their ownership will not become part of their property. Instead, it will automatically be transferred to the surviving joint tenant.
For example, if a couple owns a home as a joint tenant and one spouse dies, the surviving spouse will automatically become the sole owner of the property. However, this also means that the joint tenants cannot gain share of the property with the heirs. Their interest vanishes to death and is absorbed by the remaining joint tenants.
Establishing a joint tenant
To establish a joint leasehold, the intention to create this particular form of joint ownership must be clearly stated in the deed of property or other legal document. Just owning the property with others will not automatically create a joint leasehold. A specific legal language is required. In many cases, the act includes phrases such as “as a joint tenant with the right to life” or “co-tenant.”
It is recommended that you consult with a real estate attorney when establishing a joint leasehold. The attorney can ensure that the necessary legal proceedings are met and that the meaning of the joint tenancy is fully understood by all parties involved. This is especially important. Because one of the four unity can unintentionally change the nature of joint ownership.
Can joint tenants sell shares?
Although joint tenants have an undivided interest across the real estate, individual shares can be sold or transferred. However, in doing so, you will cut off the joint leasehold and convert it into a common tenant between the sales party and the remaining original joint tenant.
For example, A, B, and C own the property as joint tenants, C sells interest in D, and A and B remain joint tenants with each other, while D becomes a common tenant with A and B. If d dies, the sharing of D goes to the heir of D, not B.
Pros and cons of joint tenants
Like other legal arrangements, joint tenants come with both advantages and disadvantages.
Strong Points:
Avoid probate: The most important advantage is the right to survival. This allows the property to be handed directly to the survivor’s co-owner upon death, often bypassing the long and expensive probate process. Ease of transfer on death: When a co-tenant dies, transfer of ownership is generally easy and quick. Equal Rights: All joint tenants have an equal right to own and enjoy the entire property. Affordable Prices: Because joint tenants are jointly owned by the property, each tenant can split the purchase price of the property. This will improve purchasing power.
Cons:
Loss of control over inherited property: A joint tenant cannot have a share of the property. After death, it automatically goes to the surviving joint tenant, regardless of their wish. Responsibility: All joint tenants are equally responsible for the debt, taxes and maintenance of their property, even if one joint owner has a small financial contribution. Difficulty of Sale: All joint tenants must agree to sell the entire property. If one tenant wants to sell, and if another tenant doesn’t sell, it could lead to a dispute or potentially partition litigation. Resignation risk: A joint tenant can be unilaterally cut off by one joint tenant selling or transferring interest and converting it into a common tenant.
A joint tenant might be perfect for you
Joint tenancy provides a clear and often efficient way for multiple individuals to jointly owned property, primarily due to the clear right of survival. It simplifies property transfer and bypass probate upon death, but also involves limitations on individual inheritance wishes and potential challenges if the co-owner disagrees. For those seeking a simple succession plan for jointly owned property, joint tenants can be a great option, but they always fully understand the legal implications.
