Should we own our home as Joint Tenants or Tenants in Common?

When purchasing a home with another person, it is important to identify the most suitable ownership structure for the property. In provinces other than Quebec, there are two common ways in which individuals can co-own property: tenancy in common or joint tenancy. This article provides an overview of each type of co-ownership to help determine what type of co-ownership is most appropriate for a given situation.

Tenancy in Common

Tenancy in common is a type of co-ownership that may be well-suited for individuals who are not legally married, who are buying property with a friend or business partner, or who are on a second marriage and want to leave their interest in the property to a third party (i.e., someone other than their spouse) in their Wills.

Tenants in common hold an individual and divided interest in the land. Each party has the right to transfer their ownership interest at any time. If one owner dies, their portion of the property interest forms part of their estate and can be transferred to a third party by a Will.

Joint Tenancy

Joint tenancy is the most common form of property ownership for those purchasing a home with a spouse or partner. Joint tenants have full ownership of the property and have an equal and undivided right to keep or dispose of the property.

The chief distinction between joint tenancy and tenancy in common is that joint tenancy creates a right of survivorship. A joint tenant’s share of the property passes to the other joint tenant(s) upon death. As such, joint tenants cannot leave their portion of the property to a third party in their Will. Practically speaking, this means that when one spouse dies, the other spouse becomes the sole owner of any jointly-owned property (typically, this would include the marital home).

Other features of joint tenancy include:

• Avoiding Probate Fees: Since the property is transferred to the surviving owner(s) by way of the right of survivorship, the deceased owner’s estate can avoid paying probate fees on their interest.
• Equal Use and Possession: Joint tenants are “jointly” allowed full use of the property.

In order for a joint tenancy to exist, four conditions must be met:

1. All tenants must own the interest at the same time;
2. All tenants must have an equal interest in the property;
3. All tenants must acquire title by the same deed or Will; and
4. All tenants have an equal right to possession.

If any one of these four conditions is not satisfied, or if it is unclear whether a joint tenancy has been created, Courts will typically presume that a tenancy in common was formed. As such, it is important to precisely indicate the intentions of the co-owners.

It is possible to sever the joint tenancy and create a tenancy in common if the co-owners decide that joint tenancy is no longer suitable for their needs. Joint tenancy may be severed in several ways:

• One joint tenant unilaterally destroys the joint tenancy by transferring title of their share of the property to themselves, selling their interest, or mortgaging their interest. This would destroy the “unity of title” which is a formal requirement for joint tenancy (see number 3, above).
• Joint tenants may enter into a written agreement with a provision that outlines the severance of a joint tenancy upon the occurrence of certain events.
• Joint tenants may inadvertently sever the joint tenancy if they act in a way that supports a tenancy in common, as determined by the court on a case-by-case basis.

Legal advice should be sought not only to determine the most appropriate type of co-ownership, but also to ensure accurate and effective creation of such co-ownership.

For further information regarding co-ownership, including co-ownership of a marital home, please consult a TEP.