What is joint tenancy? Definition, pros, and cons

Joint tenancy is a way for two or more people to co-own property with equal shares and the right of survivorship. If one owner dies, their share passes to the surviving owner or owners without the need for probate.

Learn more about how joint tenancy works, how it compares to tenancy in common, and the pros and cons to consider.

Key takeaways:

• Joint tenants own a property in tandem and can go onto it together without restriction.
• Under joint tenancy, all parties share ownership of the property equally.
• With joint tenancy, surviving tenant(s) take ownership of the shares held by another tenant upon their death. This rule supersedes even a will.

How does joint tenancy work?

Joint tenants share equal interest in a property they own together.

Each owner has an undivided interest in the property, meaning each may access any part of it at any time. Each owner also is responsible for paying the mortgage, property taxes, and maintenance.

Joint tenancy typically includes a right of survivorship. If one owner dies, the remaining owners automatically assume the deceased owner's interest.

Joint tenancy with rights of survivorship (JTWROS)

If one owner dies, the right of survivorship automatically passes their stake in the property to the surviving owners. The transfer is automatic, though it may require updating some records.

The surviving owners inherit:

• The decedent’s property interest
• All mortgage responsibility
• Any existing liens or debts tied to the property
• The deceased owner's share of property taxes and maintenance costs
• Any outstanding property management agreements or tenant leases

The right of survivorship bypasses probate, meaning it overrides the deceased owner's will.

Property sales under a joint tenancy

A home owned under joint tenancy cannot be sold unless all owners agree to the sale.

A joint tenant may be able to transfer their shares to another person. However, this forces the recipient to enter a new ownership arrangement with the remaining co-owners. It could also change the property's ownership structure.

There are legal and tax consequences to consider. For example, the selling tenant may be liable for capital gains taxes on any profit from their share, while the remaining owners may need to restructure their financing if the mortgage was based on the original tenants’ creditworthiness.

Additionally, the new ownership arrangement that replaces the joint tenancy – typically a tenancy in common – requires updated legal documents and may trigger a property tax reassessment.

Here's a typical scenario: One joint tenant wants to sell, but the other doesn't. One possibility is that the other joint tenant buys out the first joint tenant, taking full ownership of the home. This might require new financing and a new agreement, or something called a partition agreement (in some states).

How to create a joint tenancy

Given the strict legal ramifications of this agreement, there are some prescribed steps you need to take to put a joint tenancy in place. They include:

• Time of acquisition. Because all joint tenants' names must appear on the deed, everyone must acquire their interest in the property at the same time.
• Legal documentation. The property deed must explicitly state that ownership is held as joint tenants with rights of survivorship.
• Equal ownership shares. Each joint tenant must own an identical percentage of the property, regardless of how much money they individually contributed to the purchase.
• Right of possession. All joint tenants must have an equal right to use and occupy the entire property, not just a specific portion of it.
• Financial arrangements. Clear agreements should be established up front regarding how mortgage payments, property taxes, maintenance costs, and other expenses will be divided among the owners.
• Exit plan. Joint tenants should discuss and document what happens if someone wants to sell their share or if the relationship between owners deteriorates.

It's not required but consider hiring a lawyer to create your joint tenancy arrangement.

When to consider a joint tenancy

Choose joint tenancy if you want simple, equal co-ownership with survivorship. Avoid it if you need to leave your share to heirs.

Common scenarios in which joint tenancy might make sense include:

• Married couples who want the home to pass automatically to the surviving spouse. (Tenancy by the entirety may also be an option in some states.)
• Unmarried co-owners who want survivorship
• Family members co-owning a vacation home
• Friends buying a home together

For blended families or people who want their share to go to an heir, joint tenancy may not be the best fit. Consider consulting an estate planning attorney.

Pros and cons of joint tenancy

As with all these types of arrangements, there are both pros and cons to joint tenancy. They include:

Pros

• Affordability. Because joint tenancy divides the cost of a property, it inherently makes a property more affordable.
• Simplicity. By establishing a clearly delineated financial and ownership structure, joint tenancy creates a straightforward framework that helps owners avoid the messy complications of disparate ownership percentages, complex profit-sharing formulas, and lengthy probate proceedings.
• Equal protections. Joint tenancy offers equal shares of the property, so everyone profits – or loses – by its maintenance. This helps create a strong incentive for everyone to protect the investment.

Cons

• Shared risk. If one of your co-tenants falls upon financial hard times, you must pick up the slack and ensure the mortgage payments are paid monthly.
• Disputes can be messy. If owners disagree, resolution may require legal processes such as partition or other court involvement.
• Less flexibility. A joint tenant generally cannot leave their share to someone else at death if survivorship applies.
• Potential creditor exposure. A creditor issue affecting one owner may affect the entire property.

How a tenancy in common differs from a joint tenancy

Joint tenancy is like tenancy in common (TIC), in which two or more people own a property together. Unlike joint tenancy, TIC allows owners to hold unequal percentages of the property – one person may own 70% while the other owns 30%. In joint tenancy, each owner has equal shares.

Because there are no rights of survivorship with TIC, an owner can leave their share of the property to a beneficiary or heir upon their death. An owner also may be able to transfer their share more freely.

Let's look at an example: Alex and Jordan buy a home together. If they hold title as joint tenants with the right of survivorship, and Alex dies, that share automatically transfers to Jordan. Jordan becomes the sole owner.

If they hold title as tenants in common, Alex’s share would go to Alex’s heirs, not automatically to Jordan. In the end, Jordan may end up co-owning the home with Alex’s heirs.

Joint tenancy or tenancy in common for married couples

Married couples often choose joint tenancy or tenancy by the entirety. Both include the right of survivorship, but details vary by state and can affect divorce and creditor issues.

Sometimes a married person gets a mortgage without their spouse. This has financial benefits, but it also can be complicated. Joint tenancy for married couples offers equal property rights and automatic transfer to the surviving spouse without probate.

However, it requires both spouses to agree on all major property decisions, can complicate divorce proceedings, and may override estate planning goals by automatically transferring the property regardless of what's written in a will.

Tenancy by the entirety is another common option for married couples in many states. It is like joint tenancy, with each spouse enjoying full rights in the property and the right of survivorship.

When you seek professional help with setting up any shared ownership options, there are some important questions to ask. They include:

• Do you want the right of survivorship?
• Do you want your share to go to heirs?
• Are there creditor concerns?
• Are you in a state where tenancy by the entirety is available?

FAQ

Given the byzantine world of joint tenancy, it's only natural that questions arise. Here are some of the most common.

What forms of property can be held in joint tenancy?

Several types of property can be classified within this arrangement, including bank accounts, cars, artwork, and investments. Real estate remains the most common usage of this arrangement, but joint tenancy can also cover personal belongings.

What happens when joint tenants separate?

If joint tenants decide to separate, they must agree on how to divide the property because neither party can sell their share – or the entire property – without unanimous consent from all owners. The separation itself doesn't automatically dissolve the joint tenancy arrangement, so the legal ownership structure remains intact until it is formally ended.

What happens if one person wants to leave a joint tenancy?

One person can transfer their interest to another party to leave a joint tenancy. This action automatically converts the arrangement from joint tenancy to tenancy in common for the remaining owners. That means the new party doesn't receive the same survivorship benefits as joint tenants.

What type of ownership is best for avoiding probate?

Joint tenancy with right of survivorship is the best ownership type for avoiding probate. Why? When one owner dies, the property automatically transfers to the surviving owners without court involvement, bypassing the lengthy and costly probate process entirely.

Can joint tenants have unequal ownership shares?

No, owners in a joint tenancy arrangement must have equal shares in the property. If you want unequal ownership, consider a tenancy in common.

The bottom line: Joint tenancy ensures equal ownership shares

In the convoluted world of real estate, joint tenancy offers a simpler way to purchase and divide property ownership. It offers a more affordable option, a straightforward division of the property, and a concrete way to transfer your property to others upon your death.

It also comes with some potential downsides, such as possible tension with the other owners and the need for all owners to maintain financial viability. But if you take the right steps, such as carefully choosing your co-owners and having honest conversations about finances, long-term goals, and exit strategies, joint tenancy can be a positive way for people to achieve their dreams of property ownership.

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