If you plan on purchasing a home with another person, be it your romantic partner, a friend or family member, or even a co-investor, one of the biggest details you’ll need to agree on is the ownership structure. In a situation where more than one person is buying a home, there are two options for shared ownership – Joint Tenants and Tenants in Common.
Because these structures share a handful of common features, your decision may seem relatively minor at first glance, but it’s actually monumental.
In this blog, we’ll go over these two terms, how they differ, and what you need to know if you plan on co-owning a home.
Why You Need To Know The Difference
The designations of joint tenants and tenants in common refer to how the ownership of a home is shared among multiple individuals and more importantly, how that ownership is divided, transferred, and inherited. So, if you plan on purchasing a home with another person (or multiple people), you’ll be deciding on one of these two ownership structures.
The implications of this choice are vast, and it doesn’t simply come down to what happens if one homeowner passes away. To that end, it can also be extremely difficult to reverse your decision or alter the details of your ownership structure once the pen has been put to paper.
Important Information For Couples
Understanding the difference between joint tenants and tenants in common is especially important if you and the person you’re buying with aren’t married. In Ontario, married couples automatically share equal rights to the home – even if one of them owned the property individually before the marriage. However, this structure doesn’t apply to co-buyers who aren’t married.
In the eyes of the court, a common law couple and a married couple are two different things. So, if you and your co-buyer aren’t married (including non-couples) it’s absolutely critical that you understand the distinction between these two ownership structures before you sign on the dotted line.
Looking to buy a home with someone else? You may find these related pages helpful.
- Explore Available Listings
- Home Buying Calculator
- Our Buying Process
What Is Joint Tenancy?
Joint tenancy is a form of property co-ownership where two or more people hold equal shares in a property, not unlike a married couple. With that in mind, the defining feature of joint tenancy is the right of survivorship. In other words, should one person pass away, their share of the property is passed to the remaining homeowner(s), bypassing the deceased’s will or estate.
When you opt for joint tenancy, each homeowner is entitled to an equal share of the property regardless of how much they contribute financially. Let’s say you pay for 75% of the home and your partner pays for 25%, you’ll only keep 50% of the returns if you sell the home and go your separate ways.
Joint tenants also share the property as a whole, meaning that the home can’t be divided up with exclusive rights to a specific part of the property (like a room, basement, or outdoor space) being granted to one person.
Considering a shared real estate investment? Explore these related blogs for more helpful advice.
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What Are Tenants In Common?
In contrast to the relatively straightforward equality of joint tenancy, tenancy in common is a much more flexible form of ownership where each person is entitled to a separate and individual portion of the home (and its equity).
One of the most important distinctions of tenants in common is that there is no automatic right of survivorship. If one homeowner passes away, their share of the property can be passed on to someone else through their will, rather than it being automatically inherited by the other homeowner(s).
It’s extremely important that each co-buyer understands this. We’ve seen cases where an inheritor arrives at the home unannounced looking to move in to sell their recently bequeathed share of the property after a homeowner passes away.
Beyond just inheritance, each homeowner’s share can be sold or transferred independently. In other words, you or a co-buyer can legally part with your share of the home without needing the formal approval of the other(s). While exiting an agreement is not without its special considerations, this provides more flexibility should you want to do so.
Further, in a tenancy in common arrangement, co-buyers can hold unequal shares in the property if they wish. As an example, you might own 70% of the property, while your co-buyer owns 30%, depending on your individual financial contributions or agreement.
Looking for an experienced, unbiased team to guide you through a smooth real estate purchase? We can help. Call us at 416-903-3695 or send us an email at team@mutchpropertygroup.com.
