Ownership of property is generally defined in two terms: joint tenancy and tenancy in common. While the terms may sound like they have similar meanings, they possess different attributes and functions. The purpose of these two is defined when a person decides to purchase an estate.
Estate purchases are generally done by couples or a bunch of folks who find the property perfect for them. The question then brought up is about the title of the property regarding how it is given out, and how the rights of the property will then be transferred. Here we will explore them in-depth:
Joint tenancy, as the name suggests is when the owners of the respective property partakes in an equal distribution of the property, notwithstanding each one’s individual contribution. This kind of tenancy is to finish under certain circumstances:
If the property has been sold off to another party
If/when one party of the property transfers their interest to another party of the same property
If/when one party divides the existing tenancy (done for multiple reasons, mostly including that of protecting interest of another party)
If/when one or more of the parties involved decide to transfer the complete interest of the piece of property. This, of course, excludes the registered tenant.
Tenancy in Common
In joint tenancy, every owner has an equal share or ownership in the property. However, it is not the same in tenancy in common. Here, each owner has a set share in the property. The share can be equal or unequal, however, the number of shares each person owns usually reflects that owner’s actual interest in the property.
Here are some benefits parties obtain from implementing the Tenancy in Common order of tenancy:
The asset owned will not be passed on to the surviving account when the party dies, which is favourable in many situations
The asset in question will only be passed on according to any provision that the party involved might have made in their will
Each party owns the property
Each party may also own a decided percentage of the asset
If the party involved has mentioned this from the get-go, the particular asset in question can also be transferred to any other asset owner
since they have now been granted access to the assets, this party will now be legally allowed to access the asset and use it in whatever way they may find favourable, without the need to have any say of the court
What Is the Right of Survivorship and Why Is It Important?
Right of survivorship is the very essence of having to decide between the two types of tenancies; it answers the question of the property’s place and value under the situation of a party’s demise.
As mentioned earlier, in the case of joint tenants, the remaining parties involved in the property will be handed the interest of the deceased party. This is what is known as the right of survivorship.
In the case of tenants in common, however, this idea does not exist. Any kind of division of interest only exists if the person who has died had ever left any kind of instruction about the method in which the interest was to be divided.
Which is better: Joint Tenancy or Tenancy in Common?
As a thumb rule, decision making between two options of equal importance must be done with as much objectivity as possible. It is important to keep in mind that both, joint tenancy, and tenancy in common have their own advantages and disadvantages. So, the only real factor in deciding the best option between the two is dependent on what you want for your given situation.
As an example, married couples may opt for joint tenancy as it would mean avoiding a situation of separate owned shares. In the unfortunate demise of any of the two, the remaining shares are automatically passed to the other member.
Tenancy in common has plenty of advantages as well. As mentioned above, this system is fantastic for those people with different relationships with one another like a business relationship. Even in the situation of a married couple, this system works better when one party might be protecting the interest of their dependents, like their children. This is because here the title-holding is not always meant to be passed down, and the parties would want their say on how it is nominated.
Whatever the situation may be, it is important to take your time and objectively evaluate every situation and speculate its implication as honestly as possible. If you need any advice regarding it or would like to draft a tenancy agreement, SD Conveyancing is your go-to option. We handle all kinds of tenancy agreements. Get in touch with us for more information.