Joint Tenancy: Is It the Right Form of Property Ownership for You?

Whether you’re considering buying your first or 10th property, there are several types of property ownership to consider. Joint tenancy is a form of shared ownership that can involve couples, friends, relatives or business partners. It can be a good option for many people, but there are risks associated with entering joint tenancy as well. 

What Is Joint Tenancy?

Joint tenancy is a type of shared property ownership. In a joint tenancy agreement, two or more people share an equal amount of ownership in the home. There are no limits to who can own the property together in a joint tenancy. 

How Does Joint Tenancy Work?

With joint tenancy, the parties who are going to own the property together enter a legal agreement, usually at the time when the home is purchased. The deed to the home then lists the two or more owners as joint tenants. In a joint tenancy, the owners share an equal claim to the property and as such, equal benefits and responsibilities. Both parties are equally responsible for property maintenance and property taxes. They’re also responsible for the mortgage payments if a traditional mortgage is taken out on the home. 

Joint tenancy is commonly used by unmarried couples who decide to purchase a home together. In this case, both members of the couple are listed on the deed as owners of the home. If they took out a mortgage together, both of their names are on the mortgage as well. This means that if the payments are not kept up on the home, both parties can be held responsible. If the couple later decides to sell the home, they are both entitled to an equal share of the proceeds of the sale. 

What Is a Joint Tenancy with Rights of Survivorship (JTWROS)?

One of the most significant benefits of joint tenancy is that it creates a right of survivorship. A right of survivorship means that if one of the joint tenants dies, the other owners automatically receive their share of ownership over the property. Having a right of survivorship makes the process of assigning and transferring ownership easier because it eliminates the need for the courts to get involved to divide the deceased person’s assets.  

Pros and Cons of Joint Tenancy

If you’re considering shared ownership of a property, joint tenancy might be worth looking into. Before you get too far into making your decision, though, be sure to understand the pros and cons of this type of shared ownership. 

Pros

There are several benefits to joint tenancy, including:

• The right of survivorship makes it simple for the deceased party’s ownership to be transferred to the surviving owner. 
• Every member of a joint tenancy has an equal amount of ownership in the property. 
• Joint tenancy can be a good way to make property ownership more affordable, especially if you’re interested in investing in real estate. 

Cons

There are some potential downsides to consider as well, including:

• By entering into a joint tenancy with someone, you are opening yourself up to the possibility of being held financially responsible for more than you bargained for if the other owner does not meet their financial obligations. 
• Entering joint tenancy with a friend or relative can lead to added stress and strained relationships. 
• While the right of survivorship can make joint tenancy an attractive option for some people, it prevents a joint tenant from leaving their share of the home to their heirs or another beneficiary. 

How to Create Joint Tenancy

To create a joint tenancy, there are typically four items that are required. In some jurisdictions, there may be other requirements as well. The four items that should be expected are:

Time

All of the joint tenants must acquire their ownership of the property at the same time. This means that if two people are buying a property together, their names must both appear on the deed on the same date. 

Title

This requirement states that all of the joint tenants must acquire their ownership interests through the same legal document. In most cases, a deed will be the legal document that is used to satisfy this requirement. 

Interest

The interest requirement is in place to ensure that all of the joint tenants hold an equal and undivided share of the property. So if there are two tenants, each should hold 50% interest in the property. 

Possession

All of the joint tenants have an equal right to use the entire property. None of the tenants can claim exclusive rights to any specific portion of the property. For example, if there is a house and a workshop on the property, none of the tenants have the right to claim exclusive ownership over the workshop. 

How to Mortgage Joint Tenancy

The process of getting a mortgage for a joint tenancy property is similar to most mortgage processes. Joint tenants will apply for a mortgage in the traditional way, starting with applying for prequalification and eventually submitting the official mortgage application. The mortgage lender will consider the credit scores, income and other qualifying factors of every person who will be on the joint mortgage. 

In a joint tenancy mortgage, all of the tenants are equally responsible for making regular and timely mortgage payments. The mortgage lender does not get involved with making sure that the tenants are splitting the payments equally among themselves — their only concern is making sure that the monthly mortgage payments are being satisfied. If one of the tenants fails to contribute to the mortgage payments, the other tenants will have to pick up the slack to ensure that the mortgage does not go into default. 

How to Dissolve Joint Tenancy

A joint tenancy can be dissolved in a few ways. In some cases, the joint tenants may decide to convert the agreement into a tenancy in common, which is done through a written contract. A joint tenant can also elect to sell or transfer their share of the property to someone else. If this occurs, the new owner becomes a tenant in common with the remaining joint tenants. In a worst-case scenario, if the joint tenants cannot agree on how to dissolve a joint tenancy, a legal proceeding called a partition action may be necessary. 

Other Forms of Property Ownership

Joint tenancy is a common form of shared property ownership but is not the only option. These other forms of shared ownership could also be considered. 

Tenancy in Common

With tenancy in common, the joint owners of the property can split the ownership of the property disproportionately. Instead of having equal shares of the property like you do in a joint tenancy, the ownership can be split up into varying percentages. With tenancy in common, new tenants can be added throughout the lifetime of the arrangement, differing from joint tenancy where all joint tenants must come into ownership at the same time. 

Another major difference of tenancy in common is that the tenants can leave their shares of the property to their heirs or a beneficiary in the event of their death. This is unlike joint tenancy, where ownership is automatically transferred to the surviving tenants. 

Tenancy by Entirety

Tenancy by entirety is similar to joint tenancy in some ways, but it is reserved exclusively for couples. In most cases, both parties must be married at the time they purchase the home or at the time that the ownership of the home is transferred to them. Some states might also allow couples who are in a common-law marriage or domestic partnership to qualify for tenancy by entirety. 

Like joint tenancy, in tenancy by entirety, both parties have an equal interest in the ownership of the property. Neither party in this type of agreement has the right to sell the property without the consent of the other partner. Also similar to joint tenancy, if one of the owners dies, their share of ownership is automatically transferred to the surviving owner. 

Tenancy in Severalty

Tenancy in severalty is when there is one owner of a property. The sole owner of a property in this type of ownership has full rights to do whatever they would like with the property. This means that they can sell the property, transfer it, rent it out or give it away without gaining the consent of anyone else.

How Do I Know Whether Joint Tenancy Is Right for Me?

After you’ve read through the pros and cons of joint tenancy, you can begin to consider whether it is a viable option for your situation. Before entering a joint tenancy, you should be sure that you are comfortable with sharing equal financial responsibility with the other tenants. You should also consider your long-term plans for the property and what you would want to happen to your share of the property if you die. 

Frequently Asked Questions