Although they sound similar, tenancy in common differs in several ways from a joint tenancy. In a joint tenancy, tenants obtain equal shares of a property with the same deed at the same time.
One of the primary differences comes with the addition or removal of any member from the agreement. In TIC agreements the change in members does not break the agreement. With a joint tenancy, the agreement is broken if any of the members wish to sell their interest.
For example, if one or more co-tenants wants to buy out the others, the property technically has to be sold and the proceeds distributed equally among owners. Joint tenancy members may also use the legal partition action to separate the property if the holding is large enough to accommodate this separation.
Death of a Joint Tenant
Another substantial difference occurs in the event of one cotenant's death. As mentioned earlier, TIC agreements allow the passing of property as a portion of the owner's estate. However, in a joint tenancy agreement, the title of the property passes to the surviving owner.
In other words, tenants in common have no automatic rights of survivorship. Unless the deceased member's last will specify that their interest in the property is to be divided among the surviving owners, a deceased tenant in common’s interest belongs to his estate. Conversely, with joint tenants, the deceased owner’s interest is automatically transferred to the surviving owners. For example, when four joint tenants own a home and one tenant dies, each of the three survivors ends up with an additional one-third share of the property.
Marriage and Property Ownership
Some states set joint tenancy as the default property ownership for married couples, while others use the tenancy in common ownership model. A third model, used in some 25 states, is a tenancy by the entirety (TbyE), in which each spouse has an equal and undivided interest in the property.
Pros and Cons of a Tenancy in Common
Buying a home with a family member, friend or business partner as tenants in common may help individuals enter the property market more easily. Because deposits and payments are divided, purchasing and maintaining the property may be less expensive than it would be for an individual.
Additionally, borrowing capacity may be streamlined if one owner has a greater income or better financial footing than the other members.
Pros
Facilitates property purchases
Number of tenants can change
Different degrees of ownership possible
Cons
No automatic survivorship rights
All tenants equally liable for debts, taxes
One tenant can force sale of property
However, when mortgaging property as tenants in common, typically all borrowers sign the documents. Since all members sign mortgage documents, in the case of a default, the lender may seize the holdings from all group members. Also, even if one or more borrowers cease giving contributions to the mortgage payment, the other borrowers must still cover the payments to avoid foreclosure.
The ability to use a will for designating beneficiaries to the property allows the co-tenant with control over their share. If a co-tenant dies without a will, his interest in the property will go through probate—a costly event both in terms of time and money.
Also, the remaining co-tenants may find they now own the property with someone they do not know or with whom they do not agree. This new co-tenant may file a partition action, forcing unwilling co-tenants to sell or divide the property.
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