When two or more people purchase a real estate, it is essential that they consider what type of ownership they want to set up. In this article, we will discuss the main differences between the two types of co-ownership.
Both joint tenancy and tenancy in common are forms of co-ownership. They differ, however, in the way they are created. Four unities should exist in order to create a joint status tenancy:
- Unity of time (meaning that the tenants must obtain their interest at the same time);
- Unity of title (joint tenants must receive interest from the same document);
- Unity of interest (it must be the same estate or interest);
- Unity of possession (joint tenants must have the right of possession for the whole estate)
- Tenancy in common, however, requires only one unity of possession to be created.
Also, a joint tenant owns an undivided interest in the whole estate, while in a tenancy in common such interest is divided between co-owners, meaning that each co-owner has a separate ownership share in the property.
Another significant distinction is the right of survivorship, which is essential for a joint tenancy, and absent in a tenancy in common. The right of survivorship means that when one joint tenant dies, the whole estate automatically passes to the surviving joint tenants. This process continues until there is a single survivor. The right of survivorship limits joint tenants’ rights to vest their interest to anyone in a will. However, they can do it during their lifetime. By contrast, tenants in common can leave their interest by a will to anybody without notifying the other tenants.
These two forms of co-ownership differ from each other also by the ways of their termination. Any act that destroys one of the unities will bring a tenancy to the end. Tenancy in common, unlike a joint tenancy, will not be terminated once the tenant sells his interest or estate. In a joint tenancy, in addition to the sale of the interest or estate to a third party, the tenant may also mortgage his estate or transfer it to him/herself creating a severance of a joint tenancy. The latter is the basis for the termination of a joint tenancy.
Knowing these differences will help you to decide which type of ownership you want when you purchase real estate in British Columbia.
Putting together a Real Estate Ownership agreement before you buy real estate can clarify the rules and intentions of everyone and can save you time, aggravation, and potentially large legal fees in the future.
Contact Natalya at Uptown Notaries to discuss how putting together a joint tenancy or ownership agreement can help you.