So you’re at the closing table signing your life away when all the sudden your closing agent asks you and your spouse, “Will you be taking ownership as Joint Tenants or Tenants in Common?” You quickly give each other the raised eye-brow and turn to your agent to inquire, “What’s a Joint Tenant?”
In this Word of The Week edition we will examine what it means to take ownership under Joint Tenancy versus another option of Tenancy in Common.
Joint Tenancy: A form of ownership or taking title to a property which means each person owns the whole property and that ownership is not separate. In the event of the death of one of the owners, the survivor(s) own the property in its entirety.
Alright, so in layman’s terms it means when two or more people buy a property together, they will both own the whole property and in the case that one of them dies, the ownership passes onto the other owner(s).
So under Joint Tenancy, if you and your spouse buy a home together and are both on the title to the property, your ownership rights would go to your spouse upon your death. Not a fun thing to think about, but still a very meaningful and important detail of home ownership.
Now, there is another option you could could choose called Tenancy in Common. Under this agreement, all owners of the property own a separate percentage of the property (usually equal share). If one of the owners dies, their ownership rights get passed to their living heirs (aka, family). This can get messy sometimes if one owner wants to sell but the other owner does not. Since they each own separate shares of the property, it can be a sticky legal battle in some cases.
Most married couples who buy homes together will take ownership under the Joint Tenancy agreement. However certain circumstances would work better for the Tenants in Common ownership, such as: re-married couples with separate families, investors or business partners, and friends buying a home together.
Since this is a legal ownership matter, you should always consult an attorney before making a final choice if you have questions. Your real estate agent, loan officer, and closing agent are not technically allowed to influence your decision.
LOL!
Thanks Steve. I can never keep those straight. It is funny after all these years they even ask that question any longer at closing.
I can definitely see the necessity for choosing either joint tenancy or tenants in common when signing the paperwork for a property. If buyers choose the wrong one, they could end up in a messy battle should one of the owners pass away.
I really like your word of the week feature. Great idea.
When buying my home I chose the Tenants in Common ownership. I purchased the property with my girlfriend and I would want my children to take ownership of my portion should something happen to me.