Joint Tenancy VS. Tenancy In Common

15 December 2014

Different forms of ownership can have totally different consequences

Lyn was terminally ill. Lyn believed that the house she lived in with her partner Rod was owned “jointly” by them. Lyn expected to die before Rod. Because she owned the property with Rod jointly Lyn expected Rod to inherit her share of the house. Lyn had not updated her Will since she had met Rod. The Will Lyn had made before she met Rod left everything to her son Josh.

After Lyn died it was discovered the house was in fact owned by Lyn and Rod as tenants in common. Lyn’s half share in the house therefore went to Josh, not to Rod. Rod had to make arrangements to buy out Josh’s half share so he could remain in the house. This was definitely not what Lyn and Rod had intended.

Tenancy in common and joint tenancy

Where there are two or more owners of property, they can own the property as “joint tenants” or “tenants in common”. As Rod found out, the type of ownership chosen can lead to totally different outcomes.

Any type of property can be owned jointly or as tenants in common – not just land. For example, bank accounts, company shares or vehicles can be owned jointly or as tenants in common.

A joint tenancy arises whenever there is no indication that the owners own individual shares in property. In Lyn and Rod’s case, the property had been transferred to Lyn and Rod “as tenants in common in equal shares”. The result was that Lyn and Rod did not own the property jointly. If Lyn and Rod’s property had been transferred to Lyn and Rod without the addition of any other words, a joint tenancy would have been created.

Joint tenancy (or joint ownership)

The most important characteristic of joint ownership is the right of survivorship. This means that the survivor (or survivors) of joint owners is entitled to ownership of the deceased’s share in the property when that owner dies. This will happen no matter what the deceased’s Will states. This is what Lyn and Rod thought was going to happen when Lyn died.

A joint owner is entitled to sever (or end) a joint tenancy. If joint owners sever their joint tenancy, they will become owners as tenants in common in equal shares.

Tenancy in common

If the owners of property have made it clear that they do not intend to hold the property jointly, then they will hold is as tenants in common. Usually this is done by stating that the owners hold property as “tenants in common” – as had been done with Lyn and Rod’s property. Owners of property held as tenants in common own individual shares in the property. These shares can be equal or unequal. For example, one owner can own a 1/3 share and one can own 2/3 share. Each individual owner can deal with his or her share separately. For example, each owner can transfer his or her share it to someone else or give a mortgage over it. There is no “right of survivorship” where property is owned as tenants in common. When an owner dies, his or share passes in accordance with his or her Will. If the owner has no Will, his or her share passes to the person or persons who is entitled to inherit his or her estate under the law of intestacy (the Administration Act 1969).

Owners of property as tenants in common can also change the type of ownership to a joint tenancy.

Advantages of changing the type of ownership

Changing ownership from joint tenancy to tenancy in common and appropriate changes to Wills can be useful in the following circumstances:

1. Where one owner wants to allow the other to have the use of the property or the income from it but not take ownership of it when that owner dies.

2. Where one of the owners is in residential care and the other owner doesn’t want his or her share to pass by survivorship to the owner in care as it could then be used to pay residential care costs.

On the other hand, it might be preferable to change to joint ownership. It is a simpler process to transfer joint ownership to the survivor when one owner dies. For property owned as tenants in common, a grant of probate of the deceased’s Will may be required before any of the deceased’s property can be dealt with.

Planning is key

It is common for owners to misunderstand the nature of their ownership of property with others and what will happen to the property when they die. When taking ownership of property with someone else it is important to carefully consider the implications of the type of ownership chosen and whether Wills should be updated at the same time.

Please email me with your ideas for future articles.Keep an eye out for next month’s column, where I will discuss anther relevant rural legal issue.

Barbara McDermott is part of our Private Client team at Norris Ward McKinnon.