There are two primary ways that a property in Arizona can be co-owned: through joint tenancy and tenancy in common. These two forms of co-ownership can have a significant impact on how you share, manage and pass on real estate assets. Whether you’re a homeowner, investor or someone simply planning for the future, it’s essential to grasp the key distinctions between joint tenants and tenants in common.
Today we’ll break down the differences to help you make informed decisions about how you want to hold property with others in Arizona.
What Are Joint Tenants?
Joint tenants, in the context of property ownership, are co-owners who hold equal and undivided interests in a piece of real estate. Some of the key factors that are associated with joint tenancy can include the following elements:
- Equal Ownership: Joint tenants each have an equal share of ownership in the property. If there are two tenants, each holds 50% interest, and if there are more joint tenants, their ownership shares are divided equally.
- Right of Survivorship: Should one of the tenants pass away, their stake of ownership in the property will be transferred to any of the remaining tenants without the need for lengthy and costly probate procedures.
- Unity of Time, Title, Interest and Possession: Co-owners need to meet “four unities” when they acquire a property simultaneously. These include acquisition via the same deed with equal ownership and equal rights to possess the property.
- Severance: Joint tenancy can be severed or broken if one of the joint tenants unilaterally takes actions to transfer or sell their interest in the property. This could disrupt the right of survivorship. Common ways to sever a joint tenancy include selling one’s share to a third party or transferring it to another type of ownership.
Joint tenancy is often chosen for its simplicity and the right of survivorship, which ensures the property smoothly passes to the surviving co-owner(s) upon the death of one joint tenant. It is a common choice for spouses, family members and business partners.
However, it’s important to note that Arizona joint tenancy should be carefully considered, as it may have implications for estate planning, creditor access to the property and the ability to make unilateral decisions about the property.
What Are Tenants in Common?
Tenants in common, on the other hand, are co-owners who hold interests in a piece of real estate, but unlike joint tenants, they do not have equal shares with survivorship rights. The following are the main characteristics of tenants in common:
- Unequal Ownership: Tenants in common can possess equal shares of ownership in any property, and they can be split differently with, by example, one tenant retaining a 40% share and another retaining a 60% share.
- No Right of Survivorship: Should a tenant in common pass away, the interest of ownership they possessed is rolled into the estate, where it is then most commonly distributed to any heirs or beneficiaries via probate.
- Independence and Control: Each tenant in common has the autonomy to manage and control their own share of the property. This gives them the right to transfer their share or even sell it without the need for consent from other parties with ownership interests.
- No Requirement for Equal Possession: Tenants in common do not need to possess the property together, and they are not required to acquire the property at the same time or through the same deed. The interest is separate for each co-owner.
Tenancy in common is often chosen when co-owners want to specify different ownership percentages or when they do not want to provide the automatic right of survivorship. It offers more flexibility in terms of ownership structure and estate planning.
It’s crucial for tenants in common to have a clear agreement in place that outlines their respective rights, responsibilities and expectations regarding the property. This agreement is often referred to as a “tenancy in common agreement” and can address issues such as property maintenance, expenses and dispute resolution.
Things to Consider About Co-Ownership of Property in Arizona
The differences between joint tenancy and tenancy in common leave plenty to consider.
There are important factors to keep in mind when choosing between the two include the following important elements:
- Estate Planning: Joint tenancy is often preferred for estate planning purposes because it allows for a seamless transfer of ownership to surviving co-owners. Tenancy in common may be preferred if you want to specify different ownership shares for each owner.
- Creditors: In a joint tenancy or tenancy in common arrangement, creditors may be able to place a lien on the co-owner’s share of the property and cause a partition sale to occur.
- Severance: A co-owner can severe joint tenancy unilaterally, which means they do not require consent from any other owners. But in many instances, the consent of all co-owners is mandated.
- Selling or Transferring: Selling or transferring a joint tenancy property may be more complex due to the right of survivorship. In tenancy in common, individual ownership shares can be sold or transferred more easily.
Consult an Arizona Real Estate Attorney
It’s crucial to consult with an experienced attorney in Arizona to understand the legal and financial implications of choosing joint tenancy or tenancy in common based on your specific circumstances and objectives. The type of co-ownership you select should align with your estate planning, financial and property management goals. Gottlieb Law was founded to provide the best representation for all your real estate legal needs. Our experienced lawyers can assist with residential and commercial real estate transactions, disputes, and litigation. Contact our firm today at 602-899-8188 to schedule an initial consultation or make an appointment on our contact us page.