Joint Tenancy vs. Tenancy in Common
In British Columbia, ownership on title to property by multiple people can be structured as: (1) joint-tenants, (2) tenants-in-common, or (3) a mix of both. The right structure of ownership will depend on your circumstances, so here’s a quick breakdown of what they each mean, with further explanation below.
Joint tenancy is where all owners share ownership of the entire property. If you are a joint tenant, that likely means:
- You share property ownership with another person (likely your spouse);
- You want the other owner to receive your interest in the property when you die; and
- You don’t want the other owner to have to pay probate fees to receive your interest in the property.
Tenancy-in-common is where each owner owns a specific percentage of the property. If you are a tenant-in-common, that likely means either:
- You and one or more others are registered owners of the property, with each owning a particular percentage of the property; and
- You want your interest in the property to go to someone you’ve specified in your will to receive; and
- Probate fees will be payable in order for the person specified in your will to receive the property; or
- You and another person are registered as legal owners of the property for mortgage-qualification purposes; and
- One person owns 1% and the other 99%;
- Similar to above, if you die your interest will pass through your will and probate fees will be payable in order for the person specified in your will to receive your interest in the property.
Joint tenancy presumes that all owners share ownership of the entire property, without any specific ownership percentages registered on title to the property. The benefit of joint tenancy is that if one owner dies, their interest in the property can be transferred to the remaining joint-tenant owner without requiring the deceased’s will to go through the court process known as probate. Spouses frequently use joint-tenancy ownership. A spouse can intend that upon their death, their interest in the property goes to their surviving spouse, making their surviving spouse the sole owner of the property.
For example, John and Sara own a property as joint tenants. Sara survives John. Sara can file John’s death certificate with the Land Title Office and John’s interest will be transmitted to Sara, making Sara the sole owner of the property.
Joint tenancy can also be used for more than two people. Families can use joint-tenancy as an estate-planning tool so that other family members, such as children, become the surviving joint-tenants to the family’s properties. If one of the joint-tenants dies, the survivors will assume the interest of the deceased member and remain the joint tenant owners of the property.
For example, Peter, John and Sara own a property as joint-tenants. John and Sara survive Peter. John and Sara can file Peter’s death certificate with the Land Title Office and Peter’s interest will be transmitted to John and Sara, making John and Sara the remaining joint-tenant owners of the property.
Generally, if you want your interest in your property to go to the remaining owners of the property when you die, then you should use joint tenancy. There are certain situations where joint tenancy might not be the best option for you, so talk with your lawyer before committing to a joint tenancy.
Tenancy In Common
Tenants-in-common allows for owners to hold specific percentages of the property, with that percentage ownership registered on title to the property. For example, purchasers can specify that one owner owns 20% of the property and the other owns 80% of the property. It is also not uncommon for a person to be added purely for mortgage-qualification purposes as a 1% owner. For example, if a buyer is unable to qualify for a mortgage on their own, they may add their parent as a borrower on the mortgage to qualify for financing, but to do so a bank will also require that parent be registered as an owner of the property. Because the parent doesn’t usually intend to own any significant part of the property, they will be added on title as a 1% owner.
With tenants-in-common, once an owner of the property dies, their interest in the property does not automatically transmit to the surviving owners. Instead, the interest in the property is transferred in accordance with the owner’s last will and testament or other estate-planning documents that deal with the property. If the owner doesn’t have a valid will, the Wills, Estates and Succession Act specifies how that interest will be distributed. That transfer process after death prohibits the deceased’s interest in the property from being transferred until a court has granted the right for someone to administer the deceased’s estate as executor or administrator. This court process is known as “probate”. In most cases, a court does not grant that right unless the deceased’s estate pays a government fee known as a ‘probate fee’, calculated as a percentage of the value of the deceased’s assets. Because the interest in property is held as tenants-in-common, there is no ability to automatically transfer the interest to the other owner(s), and therefore the value of the deceased’s interest in the property is included in the value of the deceased’s assets when calculating probate fees.
For example, John and Sara own a property as 50/50 tenants-in-common. Sara survives John. John’s last will and testament specifies that upon John’s death, John’s interest in the property goes to his sister, Marlene. John’s executor must bring a court application for permission to transfer John’s half of the property to Marlene and must pay probate fees which will be calculated as a percentage of all of John’s assets, including his half of the property.
Generally, if you don’t want your share of the property to go to the other owners of the property when you die, then you should use tenants-in-common as the ownership structure. If you share a property with your divorced spouse, but want to pass on your ownership in the property to a specific person who is not that spouse, you can use the tenants-in-common system to declare that in your will.
Mixed Strategy is a less common strategy that, as the name suggests, combines these joint tenancy with tenancy-in-common to benefit specific circumstances. This strategy only is an option if there are three or more owners.
For example, John and Sara are spouses and Frederika and Christine are spouses. All of them own a house together. The spouses would like joint tenancy ownership between themselves so that if one of them dies, their interest passes to the survivor. But the two spousal groups would like tenants-in-common ownership between those two spousal groups. Consequently, if John survives Sara, Sara’s interest would be transmitted to John only. If John subsequently dies, John’s interest will be distributed through his estate, and not to Frederika and Christine.
If you require any legal advice regarding joint-tenancy ownership and/or tenants-in-common ownership, or for other conveyancing or estate planning services, don’t hesitate to contact us at Bell Alliance LLP. You can reach us at 604.873.8723, or email us at firstname.lastname@example.org.
Tim Wong and Harpreet Sidhu co-wrote this article.