Difference between Joint Tenants and Tenants in Common

Join Tenants and Tenants in Common. You’d be forgiven for thinking these terms are interchangeable — most people do — but they’re actually very different approaches for buying property. Although both refer to two or more people owning the same property, each arrangement has its own distinguishing factors.

Joint Tenants

Fair’s fair — an equal split.

Under a Joint Tenants arrangement, all owners of a property own an equal share of the property. For example, when there are three joint tenants, each own a third of the property. When there are four, each owns 25% of the property, and so on. When a Join Tenant property is sold, the profits (or losses) are split equally between each of the owners. Joint Tenancy can be used by anyone, but it’s is a popular arrangement for couples.

One of the benefits of Joint Tenancy is “Right of Survivorship”. If one of the owners passes away during a Joint Tenancy, this Right means the deceased partner’s share of the property automatically passes (again, split equally) to the other tenants. If there were only two parties, then the remaining party will now own 100% of the property.

Like all good real estate arrangements, Joint Tenancy isn’t without it’s complications. The major downside is that if one owner wants to leave the Joint Tenancy, the entire property must be sold in order to break the agreement.

Tenants in Common

Equal-schmequal.

Under a Tenants in Common arrangement, owners can own different percentages of a property. For example, in a parent-child agreement, the parents may own 75% of the property, while the child owns 25%. Unlike Joint Tenancy, it's also possible to purchase and sell the percentages at different times. In our parent-child scenario, this means the child who owns 25% might choose to sell their share to a sibling down the track, without everyone having the sell the entire property to break the agreement.

When a Tenants in Common property is sold, the profits (or losses) are divided according to the ownership percentage of the agreement. The owner with 75% would receive 75% of the proceeds or losses from the sale, and so on.

Unlike Joint Tenancy, a Tenants in Common agreement has no Right of Survivorship. If a tenant passes away, instead of their share being automatically allocated to the remaining tenants, the deceased estate and will determines the outcomes of the deceased shared.

Although it’s easy for one partner to sell their share when it’s time for them to move on, one of the downsides of this that any partner can sell their share to whoever they like — whenever they like — and other partners have no say in this.
 

So, which is better?

Both agreements have benefits and downsides, so it really depends on your preferences and circumstances. It’s best to talk to the other potential tenants involved and work out which is the most beneficial for all parties. If you need an outside perspective with no bias, we can help as well.