Differences between Tenants in Common and Joint Tenancy

Carl E. Sera, CMT
Carl E. Sera, CMT
Managing Principal, Sera Capital
Carl Sera is a Chartered Market Technician and the Managing Principal at Sera Capital Management, LLC. He has over 14 years of experience in the financial services industry with a focus on investment management.

When looking to purchase a property, there are two major ways you can take up the ownership of the real estate— by yourself or with others. When you own a property by yourself, it is known as ownership by severalty, while if you co-own the property with others, then it referred to as concurrent ownership structure.

Under the concurrent ownership in real estate, the two forms of concurrent ownership are the Joint Tenancy and Tenants in Common. So, let’s take a closer look at the differences between Joint Tenancy and Tenants in Common.

Tenants in Common

This is by far the most common and adaptable form of concurrent ownership is Tenants in Common. For example, tenants in common may have different ownership interest. Tenant A and Tenant B may each have 25% interest stake in the property, and Tenant C may own 50%.

Also, interests in Tenants in Common may be acquired at different periods. So, Tenant A or B or even C may be able to purchase an interest after several years and at different times. And each Tenant in Common can receive ownership interest through separate conveyances. Tenant A and Tenant B may be on the same title while Tenant C has their own distinct title. The only thing tenants in common truly share is ownership.

Joint Tenancy

Joint tenancy on the other hand is much more restricted in that each tenant must obtain equal shares to the property. Tenants must receive the same document of ownership and at the same time. So, a joint tenancy structure consist of four unities— the shares must be obtained at the same time, same title ownership, equal interest, and equal possession of the property.

If any of the above unities are broken, the concurrent ownership is no longer a joint tenancy but now tenants in common. For example, if three tenants—Joe, Carl, and Billy own a property together as joint tenants. Then Joe decides to opt out of property ownership and sells his shares in the property to Sera. Since Sera didn’t enter the ownership within the same time frame as Joe and Carl, Sera is not a Joint Tenant but Tenant in Common.

While both ownership structures give member the right to ownership, there are several differences between these two.

Differences between Tenants in Common and Joint Tenancy

Right to Survivorship

The right to survivorship has to do with what happens to the property when one of the owners dies. With joint tenancy, the interests of the deceased owner automatically transfers to the surviving owners. So, if Joe, Bill, and Carl own a property and Bill dies, Joes and Carl owns one-and-half share of the property.

However, tenants in common have no right to survivorship. The interest of a deceased tenant is transferred to the heir in his will and not the surviving owners.

Terminating

A joint tenancy can be terminated if and only if a co-owner transfers or sells their interest to another individual. By transferring their shares, the ownership structure is broken and reverted back to tenants in common.

However, a tenant in common can only be broken under the following situations:

  • One or more co-tenant buys out the shares of the other co-owners
  • The property is finally sold and the proceeds distributed among the owners
  • A partition action is filed which allows the receiving heir sell their shares in the ownership structure.

This method of taking title in a concurrent ownership is excellent for couples and family members. This is because it allows for the transfer of the property to the next of kin or the estate without going through probate.

To learn more about 1031 Exchanges and Delaware Statutory Trusts, Schedule your 30 minute call today.

Scroll to Top