When it comes to owning real estate with another person, there are a variety of ways to hold title together. Two of those options are as joint tenants and tenants in common. In this article, we will explore what tenants in common on a deed mean, including their properties, uses, and benefits.
What is Tenants in Common?
Tenants in common is a legal arrangement that allows two or more parties to share fractional ownership interest in a property. In this arrangement, owners can have equal ownership or they could each own different percentages, such as one tenant owning a 75% interest and the other 25%. Tenants in common are able to individually sell their ownership in the property. That means that owner A could sell his 50 percent interest while owner B retains her half. The same holds true for inheritances. If owner A passes away, his ownership rights are inherited by his heirs, while owner B would continue to own her share.
Key Differences Between Joint Tenancy and Tenants in Common
While joint tenancy and tenants in common are both ways to hold title to a property with another person, there are some key differences between the two. Here are some of the main differences:
Ownership:
In joint tenancy, each owner has an equal share of the property. If one owner dies, their share automatically passes to the surviving owner(s). In tenants in common, each owner can have a different percentage of ownership, and their share can be sold or inherited separately.
Right of Survivorship:
In joint tenancy, the right of survivorship means that if one owner dies, their share automatically passes to the surviving owner(s). In tenants in common, there is no right of survivorship, and each owner can sell or transfer their share of the property.
Inheritance:
In joint tenancy, when one owner dies, their share automatically passes to the surviving owner(s). In tenants in common, when one owner dies, their share is inherited by their heirs.
Benefits of Tenants in Common
There are several benefits to owning property as tenants in common:
Flexibility:
Tenants in common allows for more flexibility in ownership percentages and the ability to sell or transfer ownership without the consent of the other owner(s).
Estate Planning:
Tenants in common can be a useful estate planning tool, as it allows for more control over who inherits the property.
Unrelated Parties:
Tenants in common is beneficial for unrelated parties, as it allows each owner to have control over their share of the property and who inherits it.
Drawbacks of Tenants in Common
While there are benefits to owning property as tenants in common, there are also some drawbacks:
No Right of Survivorship:
Unlike joint tenancy, there is no right of survivorship in tenants in common. This means that if one owner dies, their share is inherited by their heirs, rather than automatically passing to the surviving owner(s).
Potential for Disagreements:
Because each owner can have a different percentage of ownership, there is potential for disagreements over the use and maintenance of the property.
Probate:
When an owner dies, their share of the property must go through probate, which can be a lengthy and expensive process.
Conclusion
Tenants in common is a legal arrangement that allows two or more parties to share fractional ownership interest in a property. It offers flexibility in ownership percentages and the ability to sell or transfer ownership without the consent of the other owner(s). However, there is no right of survivorship, which means that if one owner dies, their share is inherited by their heirs, rather than automatically passing to the surviving owner(s). It is important to understand the differences between joint tenancy and tenants in common before deciding which option is right for you.