As a Toronto real estate agent, I am often asked about the different types of property ownership. Buying a new property is an exciting time! It’s also a great time to educate yourself on the rules of property ownership, especially if purchasing your new place with one or more co-owners. It is imperative to establish boundaries and discuss legal responsibilities and expectations with your co-owners to prevent injustice. A good first step is selecting the type of tenant agreement that works best for your parties.
The first option is that of Joint Tenants
Joint tenancy is best suited to spouses, married couples, and close-knit family members that share an undivided interest in the property. They function as equal partners and enjoy the benefit of the right of survivorship upon the other partner’s death without the stress and mess of going through probate. This means the property will remain with the other partner, as it automatically transfers leaving the surviving partner as the sole owner.
Joint Tenancy is valid if four requirements are met:
- Interest > All owners must have a unified and identical interest regarding nature, extent, and duration. If there are two partners, each would hold one-half, and if there were three, an equal one-third share would be held.
- Possession > Partnership must be equal and no one party will have exclusive decision-making powers, nor larger portions of property bestowed to them.
- Term > The agreement must be entered at the same time, for the same time for all co-owning parties.
- Title > Each co-owners interest is to be equal and created at the same time.
The alternative tenant agreement is Tenants in Common
Tenants in Common is a reasonable agreement for co-owners that have different and separate interests in the property. This works for friends, investors, and relatives alike. The division of the property is not necessarily equal, but it is clearly outlined what is intended for each party. Here there is no right of survivorship and in the event of death, parties may leave their percentage to the person of their choosing. It is pertinent to know that there is a stronger chance that this situation will go through probate when compared to joint tenancy.
If you’re still trying to decide what best suits your situation, consider these additional factors…
Right of Survivorship: Who do you want to take possession of the property upon death? If it’s a spouse or close family member, and you wish to avoid probate, joint tenancy is the way to go. There is a way to sever this arrangement if you decide it is the not ideal solution down the road
Severing Joint Tenancy: To terminate joint tenancy, one of the following three things can occur:
- Transfer – One owner transfers a portion to someone else or themselves.
Consent – All parties decide to dissolve the arrangement with written consent
Conduct – The agreement can be altered to tenants in common should the arrangement lack equal justice
Probate: Probate is the process of approval in which the will in question must be validated before any transfer in property title can occur.
Division of Equity: Not all partnerships are created equal. If potions are not of a 50/50 division, it is imperative to outline divisions and financial expectations. It is beneficial to have a tenant agreement in place to prevent an injustice from occurring.
Agreement: Consider a paper copy, legally drafted by a professional to ensure all co-owners protection.
With this increased knowledge, hopefully, you are better prepared to make upcoming decisions for your tenancy. If you have any questions surrounding this or additional real estate questions, please feel free to reach out to our team or your preferred real estate lawyer. Good luck with your decisions and welcome home!
Legal Information provided by:
Zachary Soccio-Marandola
Real Estate Lawyer
socciomarandola.com
