Get Started
6 min read

Joint tenancy: Definition, pros, and cons

Featured Image

Many people assume that buying a house is impossible for them to accomplish on their own. But what if you didn’t have to do it on your own? There are types of property ownership that allow you to jointly own a property with other people. For instance, joint tenancy is a common type of property ownership that you should consider. Here’s what you need to know about this concept and how to determine if it’s the right fit for you:


What Is Joint Tenancy and How Does It Work?

Joint tenancy is a property ownership status where a property is equally owned by more than one person. Unlike other types of property ownership, almost anyone can enter into a joint tenancy agreement regardless of the relationship between them. For instance, unmarried couples, relatives, business partners, and friends can enter into a joint tenancy agreement. 

All joint tenants are equal co-owners with the same amount of interest and liability in the property. All tenants must enter into the agreement simultaneously, and the agreement must be terminated in the event of one tenant giving up their shares. If the shares are transferred to another party, a new agreement must be made. 

Finally, joint tenancy involves the right of survivorship -- which dictates what happens to the property in the event of the death of one of the tenants. Instead of being transferred to heirs through probate, the decedent’s property shares are automatically transferred to the surviving tenants. 


How Does Joint Tenancy Differ From Other Types of Tenancy?

Joint tenancy is only one type of tenancy option to consider. While this arrangement may work well for some, it may not be ideal for others. Here are some other types of tenancies that you should know about to make the best possible decision in terms of your property title arrangement: 

  • Tenancy in common: This type of arrangement is largely similar to joint tenancy but is more flexible. For instance, tenants in this arrangement aren’t required to have or maintain equal shares in a property. Instead, they can split interest however they like. Furthermore, they can take on sole responsibility for loans taken out using their shares as collateral rather than being equally liable for all debts against the property in joint tenancy. Tenants in this arrangement can sell their shares of the property at any time without the consent of the other parties involved. Finally, this type of arrangement doesn’t feature the right of survivorship, and tenants are able to pass down shares to heirs. 
  • Tenants by entirety: This type of arrangement is available for married couples that allows them to jointly own property as a single legal entity. Each spouse has an equal and undivided interest in the property. This type of arrangement features the right of survivorship wherein the surviving spouse would receive full ownership of the property in the event of the death of one spouse. 
  • Sole ownership: This type of arrangement is pretty straightforward in that a property is owned in its entirety by one person. 
  • Community property: This type of arrangement states that each spouse within a marriage equally owns everything, including property, cars, furniture, etc. This type of ownership doesn’t take into account who made or spent the money used to purchase the assets -- it’s all equal. California, Arizona, Nevada, Louisiana, Idaho, New Mexico, Washington, Texas, and Wisconsin are all states with community property laws in the United States. 


What Are the Pros of Joint Tenancy?

For many people, joint tenancy can be a very beneficial arrangement that works well without significant problems. Here are some of the pros of joint tenancy that you may want to consider:

  • Affordability: Perhaps the biggest pro of joint tenancy is that it often makes property ownership more affordable and accessible since you’re splitting the costs between more than one person. In many cases, it can be difficult for a single person to afford property ownership and maintenance costs on their own -- this is especially true if you’re self-employed and don’t have a regular or traditional source of income. However, involving other people can cut the costs and make it a more realistic option for those who thought property ownership was well out of reach. 
  • Rights: In joint tenancy, all tenants have rights to rent and profits from the property according to the proportion owned by each person. 
  • Responsibilities: In joint tenancy, all tenants are responsible for the upkeep and maintenance of the property. Since each party is an equal owner, each party should have an equal incentive to keep the property well maintained. 
  • Taxes: In joint tenancy, all tenants can enjoy tax benefits that come with owning a property. Furthermore, this type of arrangement often allows you to avoid the imposition of a gift tax that often comes with adding multiple people to a property deed.  
  • Avoid probate: Joint tenancy follows the right of survivorship rather than inheritance. In the event of the death of one of the owners, the deceased will bequeath their property shares to the other owners. This is a relatively straightforward process that allows you to avoid the often complicated and drawn-out probate process to identify possible heirs and transfer ownership that way. 


What Are the Cons of Joint Tenancy?

If you’re considering entering into a joint tenancy arrangement, you should understand the whole picture. Like with any arrangement, while there are pros, there are also cons to consider. You should consider these potential cons based on your unique situation to make the best possible decision. 

  • Responsibility: In a joint tenancy agreement, all tenants are equally responsible for paying the rent or mortgage, in addition to things like property taxes and homeowner’s insurance. While splitting these costs may seem like a great idea that will lower costs and benefit everyone involved, individual financial situations can quickly change. For instance, another tenant loses their job and is now unable to make payments -- you’re now responsible for making these payments on your own. 
  • Compensation: In a joint tenancy agreement, tenants are responsible for paying compensation towards damage or waste that they contributed to or committed. 
  • Relationships: In a joint tenancy agreement, tenants are still beholden to this agreement despite changes that may occur to the relationships between them. For instance, friends who enter a joint tenancy agreement may have a falling out and be stuck in such an agreement. Furthermore, spouses who enter into a joint tenancy agreement may separate and get divorced -- all the while remaining jointly responsible for the property in question. 
  • Inheritance: In a joint tenancy agreement, there are no inheritance rights. Instead of the property being transferred to heirs after the death of a tenant, the property is instead transferred to the other tenants involved. 


How to Do Joint Tenancy Right

If you think that the pros of joint tenancy outweigh the cons for your situation, there are still things that you can do to help mitigate some of the present risks and do joint tenancy right. Here are some tips and tricks to help you get the most out of this type of real estate agreement:

  • Only enter into a joint tenancy agreement when you have a strong and healthy relationship with the other tenants. Also, make sure that they are financially responsible since you will be on the hook for property-related payments if they’re unable to pay. 
  • Only enter into a joint tenancy agreement if you understand the legal implications. For instance, if you’re looking for your child to inherit your share of the property upon your death, joint tenancy isn’t the right arrangement for you. Additionally, ensure that all rights and responsibilities related to the joint tenancy are laid out in a legally binding document. Read and understand the document before signing. Consult a real estate attorney or a probate attorney for assistance if needed. 
  • Only enter into a joint tenancy agreement if you understand the tax implications. For instance, you will have to decide how to pay community property taxes. You will also need to determine how to split up mortgage interest deductions, residential energy credits, and other tax breaks according to your specific agreement. Consult a tax professional for assistance if needed. 


Final Thoughts on Joint Tenancy

Like any arrangement, joint tenancy has its pros and cons. It’s essential to understand the ins and outs of this concept before you enter into it with a friend, partner, relative, etc. If this arrangement works for you, then great! If not, there are other types of tenancy to consider that may work better for your situation. At the end of the day, you should always consult with your lender at Vaster Capital, your real estate agent at Fortune International Realty, your attorney, and your accountant before purchasing a property or entering into a tenancy agreement. 



4 Kinds of Real Estate Ownership |

Joint Tenancy vs. Tenants in Common |

What is Community Property? |