What Is Joint Tenancy? Should You Opt For It?

A house can be legally owned by one person or more than one together. Joint tenancy is a legal arrangement where two or more people own a residential property together with equal rights and obligations. The co-owners need not be related to each other.

Though the concept is largely associated with real estate as "tenancy" is usually used synonymously with living in a home or owning one but this can apply to a range of assets from businesses to brokerage accounts.

How are "joint tenants" different from "tenants in common"?

To understand the concept of joint ownership completely, one can compare it with "tenancy in common." In the case of joint tenancy, the owners of the property have equal rights and obligations and enter into the ownership at the same time. This kind of ownership is based on survival of the owner. When one of the owners of the joint tenancy dies, his/her share automatically passes on to the surviving owner. For example, an unmarried couple at the time of purchase of a house property opts for joint tenancy. When one of them dies, the complete ownership will shift to the other person.

In the case of "tenancy in common," the ownership of the property is can be divided into unequal parts based on their proportion of investment to buy the asset. The owners will be entitled to the sale proceeds or rent earned in the proportion in which they have invested.

In case of death, the share of the co-owner in a common tenancy may go to his/her legal heir (as per their Will) and not necessarily to the co-owner. It also allows a person to obtain an interest in the property years after own or more people have entered into tenancy in common and one can invest in any proportion viable to them. The co-owner need not enter into an agreement at the inception of the deal. This feature additionally allows a co-owner to buy a percentage of another co-owner's share at any given time.

When to opt for it

"Tenancy in common" is ideal for relatives or friends interested in the same house property while joint tenancy is more suitable for couples. (Note that this is just an opinion and one can enter into any arrangement they see fit.)

The advantage of joint tenancy is that it eliminates the need to clear the asset ownership transfer through a will. The ownership shift becomes easy. The new owner can immediately access property or equity if needed, rather the go through the burden of formalities.

Joint tenancy also means equal responsibility, which means that if one of the owners decides to take a loan against the asset, they share equal accountable to pay off the loan.

The disadvantage of joint tenancy is that the survivor decides how the asset will be handled. If the deceased wanted to pass on the assets to his/her heir but failed to it legally correct it, the survivor has no obligation to do it. All the rights lay with the survivor and he/she can choose to use the asset as he/she sees fit.

It is therefore advisable to make sure the sale deed or title document of the property clearly mentions the type of ownership so that there are no disputes at the time of sale of property or a co-owner's death.