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Joint Tenancy

DEFINITION

Equal property ownership by two or more people.

EXPLANATION

Joint tenancy refers to when two or more parties hold an equal, undivided interest in a property.

Unlike other forms of ownership, joint tenancy allows any two individuals to be joint tenants with each other. This includes real estate investors, partners, married and unmarried couples and everyone in between. Additionally, shares can be transferred to another party prior to their death. Unfortunately, if the property is not transferred before the joint tenant’s death, the other joint tenant will gain all shares lost from the joint tenant’s death.

In California, all four aspects of joint tenancy must be established in order for a property to be considered a joint tenancy:

Unity of title: Title is executed in the same deed.

Unity of time: Execution of the ownership must occur at the same time.

Unity of interest: All parties hold an equal share.

Unity of possession: As equal owners all parties have the right to possess the property.

If any of the four aspects of joint tenancy are missing, the property will instead be a tenancy in common.

A joint tenancy can be created through a written agreement, negotiable instrument, or transfer.

Rights of Joint Tenants

All joint tenants have the same rights. Joint tenants enjoy unrestricted use and access of property, unless it infringes upon the right of enjoyment of the other tenants, or willfully excludes them.

Joint tenants have a duty to contribute to standard property expenses. Typical expenses include mortgage payments, property taxes, maintenance costs, and HOA fees (if applicable). Joint tenants also have the legal right to verify the accounting used to calculate the profit and losses associated with the property. If one of the joint tenants fails to keep current with their portion of expenses, the violating party may be subject to a loss in their stake in the property.

Joint tenants are not obligated to pay for costs other than standard property expenses. For example, if one joint tenant makes elective repairs or improvements to a property, he or she cannot require other tenants to contribute to the cost of those alterations. However, if the alterations drastically improved the property’s value, the joint tenant who made them will recover a higher portion of the profit upon the sale of the property. (Conversely, that joint tenant will be held liable if the alterations negatively affect the property value.)

Joint tenants also have the right to retain financing. Typically, lenders who provide joint tenancy funding require the joint tenant to purchase life insurance in the event that he or she dies prior to the debt being paid off.

Obligations of Joint Tenants

Should a judgment be filed against a joint tenant, the property will transfer to the surviving joint tenants and the judgment against the property will be suspended. If a joint tenant with a judgment dies, the property will be transferred without the debt to the other joint tenants.

In the event that joint tenants have a dispute over profits or responsibilities, courts may intervene to help parties equally divide assets and responsibilities.

There are three types of ownership whereby two or more individuals hold stake in a property:

Joint Tenancy

Tenancy in Common

Community Property

Property deeds typically indicate the type of tenancy or partnership held between co-owners. If co-owners do not specify that a tenancy is a joint tenancy, a partnership, or a community property, a tenancy in common is automatically created.

Right of Survivorship and Joint Tenancy

Upon the death of one of the joint tenants, the property will be transferred to the remaining joint tenants. This is called the right of survivorship. Essentially, the share of the property dies off with the death of one of the joint tenants. Because property held as joint tenant cannot be transferred to an heir, joint tenants can never be responsible for probate fees. To reclaim the share of the deceased joint tenant, the other joint tenant(s) must submit an affidavit of survivorship and a certificate of death for the deceased party. Once all documents are submitted to title, title will be held exclusively by the other joint tenant(s).

Example

Brother’s Bradley and Avery purchase the Rockingham residence as joint tenants. Within a few years of purchasing the home Bradley gets into a bad car accident. Shortly thereafter Bradley dies from major brain injuries. Under this scenario, who does Bradley’s share of the property go towards?

As a joint tenant of the property, Avery is entitled to his brother’s portion of the property. Even if Bradley had a will with another person as his heir apparent, the fact that the property was purchased as a joint tenant bars the property from being transferred to another individual through a will. If however Bradley had transferred his joint tenancy to someone else prior to his death, the joint tenancy could have been transferred.

Specific Factors of Joint Tenancy

Unlike a tenancy in common that can be executed at anytime and have unequal shares, tenants in a joint tenancy must take title to the property at the same time, executed on the same document, and hold equal shares.

A joint tenancy does not allow property to be transferred to an heir of a will. Even if the joint tenant created a will indicating an heir, the fact that the property was held as a joint tenant prevents the property from being transferred to another individual other than the joint tenant.

Upon the death of one of the joint tenants, the property will be transferred to the remaining joint tenants. This is called the right of survivorship. Essentially, the share of the property dies off with the death of one of the joint tenants. Because property held as joint tenant cannot be transferred to an heir, joint tenants can never be responsible for probate fees. To reclaim the share of the deceased joint tenant, the other joint tenant(s) must submit an affidavit of survivorship and a certificate of death for the deceased party. Once all documents are submitted to title, title will be held exclusively by the other joint tenant(s).

Example of Joint Tenancy

Daniel marries his longtime girlfriend Sarah. Prior to their marriage, Daniel purchased many properties as a real estate investor. Is Daniel required to make the property he purchased prior to marriage community property?

No. Daniel owned the property prior to the marriage, which means he has the legal right to keep assets before marriage as his own property. Sarah is not entitled to Daniel’s properties; however, Daniel cannot comingle assets between his own property and community property he owns with his wife, Sarah.

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