What’s the Difference Between Joint Tenancy and Tenancy in Common?
When two or more people or entities are purchasing a property together, one of the most important decisions is how the purchasers want that title held. Generally, tenancy in common or joint tenancy are the two ways to accomplish this. Determining between tenancy in common and joint tenancy is based on the purchasers’ specific circumstances. This determination should be handled on a case-by-case basis and there is not one-size-fits-all approach for every client. This article will outline the two main forms of holding a title: tenants in common and joint tenancy. In addition, this article will dive into how transferring property will affect those interest, specifically within the realm of estate planning.
If you need assistance with estate planning do not hesitate to give us a call at (720) 513-2299 or schedule an initial consultation with one of our attorneys.
Tenants in Common vs. Joint Tenancy
A. Tenancy in Common
Tenancy in common is one of the two main types of concurrent ownership interests in real property. Tenancy in common is outlined below:
In Colorado, tenants in common is the default. This means that when drafting a deed and purchasing a piece of real property if joint tenancy is not listed tenants in common will be inferred.
Tenancy in common is an agreement where two or more people share the ownership rights of the real property.
When one of the multiple tenants in common passes away, the property can pass through said tenant’s estate.
Each independent tenant in common may control an equal or differentiating percentage of the real property. When two or more people agree to be tenants in common, the people are agreeing to own the entire property equally as a group. However, the individuals can still own varying percentages in their individual capacity.
For example, if there are three owners where one owns 50%, and the other two owners own 25% each those percentage interests can be transferred through an estate plan. However, no one individual can claim ownership to any specific portion of the property.
B. Joint Tenancy
Joint tenancy is one of the two main types of concurrent ownership interests in real property. Joint Tenancy is generally below:
Joint tenancy can be created by married or non-married couples, relatives, friends, or business associates.
A joint tenancy creates a right of survivorship. Under Colorado law, a right of survivorship means that upon the passing of a joint tenant(s) that interest will pass to the surviving joint tenant(s) without having to go through probate.
This means that to own property as joint tenants, the deed needs clear and conspicuous language specifying that the grantees are taking title as joint tenants.
In the absence of such language or clear designation that the grantees are taking title as joint tenants, then Colorado law assumes that the property is being conveyed to the grantees as tenants in common.
Transferring Your Interest
A. Tenancy in Common
Upon the death of a tenant in common, their respective interest can transfer via an estate plan. This means that the individual can leave their interest in the property to any beneficiary. In addition, the individual can gift or sell their interest. However, it is important to transfer the interest without probate.
B. Joint Tenancy
Upon the death of a joint tenant, their respective interest will transfer to the other joint tenant(s). Under Colorado law, the transfer or severance of joint tenancy is determined by the number of people holding the property in joint tenancy. Information concerning the transfer and severance of joint tenancy is explained below:
i. Two Joint Tenants
When the property is held by two joint tenants the joint tenancy will be severed if one of the joint tenants conveys or transfers their interest to a third party. The remaining co-owners will hold the property as tenants in common and the rules concerning conveyance, sale, and gifting of the property are outlined above.
ii. Three or More Joint Tenants
When the property is held by three or more joint tenants, a conveyance by one of the joint tenants will sever the joint tenancy, but only for the conveyer’s interest. The other joint tenants will still retain their joint tenancy right of survivorship, while the grantee holds their interest as a tenant in common.
iii. Married Joint Tenants
If the joint tenants are married, the granting of a divorce will automatically terminate the joint tenancy, and the former spouses will hold the property as tenants in common.
Speak With an Estate Planning and Probate Lawyer in Northglenn
Different rules apply whether the property is held via a tenancy in common or joint tenancy. It is important to research the best course of action and contact an attorney prior to transferring an interest. The most common problems we see with clients is the attempt to transfer their interest without consulting an attorney. In addition, it is important to decide what fits best with your circumstances on a case-by-case basis.
If anything in this article concerns you or you need assistance with estate planning questions you can schedule an initial consultation here or call our office at (720) 513-2299.