Joint Tenants vs Tenants in Common

When two or more individuals purchase a property together, they have the option to hold the property as either joint tenants or tenants in common. Understanding the difference is important because it impacts the way the property is shared and how it is distributed upon death.

Joint Tenants

Joint tenancy is a type of co-ownership where each owner holds an equal and undivided interest in the property. In other words, each owner has an equal right to occupy, use, and make decisions about the property.

The most important feature of joint tenancy is the right of survivorship. This means that if one owner dies, the surviving owner automatically becomes the sole owner of the property, without the need for probate.

In order for joint tenancy to be valid, four (4) requirements must be met:

1. Interest - Each owner’s interest must be identical in respect of duration, extent and nature. For example, if a property is held by three owners, each must have a one-third interest.
2. Possession - Each owner must have an equal, undivided ownership in the property, and no one joint owner can have exclusive possession or ownership.
3. Term - Each owner must own the interest at the same time and for the same period.
4. Title - Each owner’s interest must be the same and must be created at the same time in the same document.

Joint tenancy is most commonly used by married couples or close family members who want to ensure that their property will automatically pass to the other owner(s) in the event of death.

Tenants in Common

Tenants in common is a type of co-ownership where each owner holds a separate and distinct interest in the property. Each owner has the right to occupy a specific portion of the property and may leave their share to whoever they choose in their will.

In contrast to joint tenancy, there is no right of survivorship in tenants in common. This means that upon the death of one tenant in common, their share of the property is distributed according to their will. Tenants in common is used by individuals who want to maintain control over their share of the property.

Additional Considerations

When deciding how to take title to a property, co-owners should consider the following factors:

Right of Survivorship

If you want the property to automatically pass to the surviving owner(s) upon your death, then joint tenancy would be the better option. This type of ownership is often used by married couples or close family members who want to ensure that their property will pass to the surviving owner(s) in the event of death.

Division of Equity

If co-owners want to assign different percentages of ownership, for example 70%-30% rather than 50%-50%, then tenants in common would need to be used. Upon the death of an owner, their specified percentage share would remain with their estate.

Co-ownership Agreements

When tenants in common is used, it's a good idea to enter into a co-ownership agreement. There are a number of considerations that arise over the course of owning property that the co-owners should consider ahead of time - in writing.

Probate

In Ontario, if a property is held as joint tenants, it will not need to go through probate. However, if the property is held as tenants in common, it may still need to go through the probate process, which can be time-consuming and costly. Therefore the decision of which type of ownership to use is an important consideration of estate planning.

Severing Joint Tenancy

Joint tenancy can be severed and converted into tenants in common easily - and sometimes unintentionally. There are three (3) ways that this can happen:

• Transfer - one owner can unilaterally transfer their share in the property to someone else or themselves.
• Consent - all owners can consent to a severance of the joint tenancy in writing.
• Conduct - if co-owners act and operate the property like tenants in common, it can be deemed that the joint tenancy is severed to prevent injustice.

Conclusion

The question to hold a property as joint tenants or tenants in common in Ontario depends on the intentions of the co-owners. Joint tenancy is used by those who want to ensure that their property will automatically pass to the surviving owner(s) in the event of death and avoid probate. Tenants in common is used by those who want to maintain control over their share of the property and ensure that it will pass to their designated beneficiaries. It's important to consider the many consequences of each ownership type and make an informed decision with the help of a professional.