Joint Tenants vs Tenants in Common
What is it?
When two or more people purchase a property in British Columbia together, they can own that property in one of two ways: Joint Tenancy or Tenancy-In-Common.
Tenancy-In-Common is a form of combined ownership, whereby each person owns an undivided share in the property. The shares must add up to 100%. The registered owners can have equal or unequal undivided shares in the property. Under a Tenancy-In-Common, when one of the registered owners passes away, their share in the property does not “automatically” pass to the other surviving registered owner(s). Instead, that deceased’s share forms part of their estate, which will pass to their beneficiaries in accordance with their Will.
Joint Tenancy is the other form of combined ownership, whereby all of the registered owners own the entire property together at the same time. There is no undivided share in the property for one of the registered owners. Accordingly, if one of the registered owners passes away, the surviving registered owner(s) will continue to own the entire property. Due to this right of survivorship, there is no transfer of property required to put the property into the survivor’s name. A property owned under a Joint Tenancy would not form part of the deceased’s estate.
Although related individuals who own property together, particularly people in marriages or in common-law relationships, usually decide to own the property as Joint Tenants, that decision should not be made so hastily. For example, for people in their second or third marriage, there may be children from their previous marriage/relationship that they have to consider when determining who acquires their share in the property.
Combination of Joint Tenancy and Tenancy-In-Common
If three or more people are buying a property together, they have another choice besides being just Tenants-in-Common or just Joint Tenants—that is, a combination of the two.
Given the current state of the real estate market, two married couples buying one house together is quite commonplace. You also see it where young first-time home buying couples have to add their parent(s) on title for mortgage purposes.
Joint Tenancy as a Gift or Trust
Many aging parents think about putting their home in joint tenancy with their children to avoid the costs and hassle of probate. Before doing this, it’s important to be clear about the reasons and to document them.
If a parent adds a child to the home’s title under joint tenancy, it’s crucial to document their intent. This is especially true if only one child is added. That child would become the sole owner when the parent passes away, which could cause issues with other children and lead to potential problems.
Was the transfer meant to be a gift, giving the child true ownership? If so, proper gift documents should be prepared and signed.
Or was it for convenience, with the child holding the property in trust for the parent? If so, proper trust documents should be prepared and signed.