Joint tenancy is an investment term that means when two or more parties want to co-own a property — commercial or otherwise — a legal relationship must be defined before signing an agreed-upon contract. A joint tenancy can ensure ownership in a common interest and protect a real estate investment for the owners and stakeholders alike.
As a method for two individuals to own one property, joint tenancy gives all parties equal rights and obligations to the property and their agreement. Joint tenancy is common in housing agreements, where married or unmarried couples, friends, or relatives co-own a home. It’s also seen in joint business ownerships and other arrangements where multiple parties have an equal interest in a property. Each joint tenant in this situation is entitled to the same benefits, including half of any profits acquired through renting or selling the co-owned property, and the same fees and responsibilities such as mortgage payments, property taxes and maintenance.
Joint tenancy is a partnership in which all parties agree to participate in ownership and maintenance of the property or business, but if one party fails to meet those obligations, the other party or parties have to assume all forgone financial responsibilities.
When a joint tenancy relationship is set, if one or more of the co-owners becomes unable to continue ownership due to death, illness or incapacitation, ownership goes directly to the surviving parties. This is called the right of survivorship. If an owner dies, the joint tenant or tenants keep the property — no probate or court system gets involved. However, this becomes complicated if a married couple divorces or a business partnership dissolves, and a court may be involved to settle dispute.
Joint tenancy and tenancy in common are similar concepts in application but have major differences in legal roles. While joint tenancy is a partnership agreement between two or more individual parties with equal interests, tenancy in common binds partnerships with percentage-based ownership. Tenancy in common allows for one party to, for example, own 50% of the property and two other parties to own 25% each. Shares can be traded at any point of the partnership. This arrangement allows assets to be divided between surviving parties in an individual’s will, rather than the interests going directly to the joint tenant.
When applied to commercial real estate interests, joint tenancy as a legal relationship can benefit investors as a fail-safe to ensure ownership in case of survivorship. But, in practice, many properties that are owned by one or more individuals are actually known as tenancies in common. This is often seen in commercial real estate when one majority party buys out the shares of the other tenants.
Joint tenancy is a mainstay of the real estate market, seen in both housing agreements and commercial investments. Understanding the relationship between parties in this agreement can help define the roles and responsibilities of each party, both in ownership and in survivorship.
