When 2 or more buyers are purchasing a home, there will always be a choice regarding the title. Will you be tenants in common or will you have joint tenancy? The main differences between the 2 options fall into these 2 categories:
- ownership interests
- rights of survivorship
How should you take title on your new home? Read on to understand these 2 options in order to make an informed decision.
Tenancy In Common
When 2 or more people own property as tenants in common, all areas of the property are owned equally by each person in the group. Because of this, no individual can claim ownership to a specific part of the property. However, while one person may not claim ownership to a particular part of the property, the people in the group can have different ownership interests and may enter into the ownership at different times.
For example, Jane and Jerry may enter into a tenancy in common ownership where Jane owns 25% of the property and Jerry owns 75%. A couple of years later, Jerry may want to share 25% of his interest with Jim. Thus, Jane still owns 25%, Jim now owns 25%, and Jerry owns 50%.
What happens when 1 or more parties of this type of ownership becomes deceased? In a tenancy in common situation, there are no rights of survivorship meaning that the deceased tenant’s interest is not divided equally among the other owner(s). The portion that was owned by that tenant now belongs to the estate and will pass on to the heirs listed in the will.
In a joint tenancy agreement, the property is owned by at least 2 people, and all tenants have an equal right to the property. All parties involved have equal responsibility and enjoy the positive attributes as well as the liability.
Because of the shared responsibility, one person cannot incur debt on the property without indebting themselves in the process. For example, a husband cannot take out a loan against a house, divorce his wife, and leave her to repay the debt. Both parties are equally responsible for the repayment of the loan. Also, one tenant may not lease out a portion of the property without sharing the proceeds with the other tenants.
Unlike tenants in common, joint tenancy does have the right to survivorship. When a property is owned by joint tenants and one becomes deceased, the interest of the deceased owner automatically and immediately transfers equally to the remaining surviving owner(s).
More You Should Know…
- Under Colorado law, unless the deed states otherwise, 2 or more people will be presumed to hold title as tenants in common with an equal undivided interest in the property.
- It is important to be clear on which type of ownership best suites your specific situation. Otherwise, when one party dies or chooses to terminate his portion of the agreement, you may have some issues such as frozen assets that will be dealt with in probate court.
- Joint tenancy can be dangerous in unstable relationships because of the fact that all parties have to be in agreement before making any major decisions (i.e. selling a house). In a tenants in common situation, each owner is free to do as they please with their interest in the property.
When you decide to enter into an ownership with another party, carefully examine each option before making a decision. For more on this or anything else real estate related, feel free to give us a call @ 720-593-2014. Our team of well-trained agents are always happy to help! We look forward to hearing from you!
Sources: Land Title Guarantee Company, investopedia.com, realestate.findlaw.com