Joint Tenancy vs Tenancy in Common: What’s the Difference?

If you are currently taking a real estate licensing course and are preparing for your real estate licensing exam, be aware that you will need to understand the concepts of joint tenancy and tenancy in common. 

This article will explain these ownership options and other related issues in greater detail. Please be aware that, although the word "tenant" is commonly used to refer to an individual who rents property, it refers to ownership in the context of this article.

When are Joint Tenancy and Tenancy in Common Used?

Several ways exist in which more than one individual can own a property together. The most common include joint tenancy and tenancy in common. Although both ownership options recognize the parties as joint property owners, there are several critical differences between them both. 

What is Joint Tenancy?

Joint tenancy refers to a type of ownership where more than one individual enters into an ownership agreement through a property deed. The parties involved in the joint tenancy may be business associates, friends, or relatives. 

Consider, as an example, a married couple who purchases a home together and chooses a joint tenancy ownership option. In this case, the property deed will name both individuals as owners or joint tenants. 

Because each individual is named, they both share in any property benefits. Should they decide to rent or sell that property, they are both entitled to 50% of the profit. However, the relationship goes both ways. So, each party is equally responsible for maintenance, property taxes, mortgage payments, or any other associated fees. Should one party fail to meet its financial obligation, the other named party will be required to assume responsibility.

What is the Right of Survivorship?

A joint tenancy agreement features what is known as right of survivorship. Essentially, a right of survivorship states that should one named party die, the remaining party or parties automatically assume full ownership. A right of survivorship eliminates any need for probate. It also eliminates the need to transfer the deceased party's assets to their estate. 

What is Tenancy in Common?

A tenancy in common (TIC) is also an arrangement where more than one party shares property ownership. Each owner is independent and may control either equal or varying percentages of the entire property. Unlike a joint tenancy, when one of the tenants in common passes away, their share passes along to their estate, giving them a right to divest their share to the beneficiary of their choosing.

Tenants in common have equitable privileges and interests related to the property, but co-tenants may have different shares of ownership interest. 

Consider, as an example, a property owned by three individuals. Doug and John may own 25% of the property each, while Greg owns 50%.

Unlike a joint tenancy agreement, individuals can enter into a TIC agreement at any given time, even years later. 

Using our example, Doug and Greg could have each owned a 50% share of the property initially as tenants in common, but, at some later date, Doug could have chosen to bring John into the TIC agreement, splitting his 50% share with him. This move would have created a TIC agreement with a 25/25/50 ownership split. 

Parties named in a TIC agreement may also independently borrow against or sell their share of ownership. 

What are the Acronym Used to Determine Joint Tenancy or Tenancy in Common?

The state real estate licensing exam will likely ask you to list the four factors determining joint tenancy. 

These four factors (which create the acronym "PITT") are as follows:

• Possession: In a joint tenancy, parties hold equal rights to possession of the property.
• Interest: In a joint tenancy, tenants hold an equal interest in the property. 
• Time: In a joint tenancy, tenants acquire a property simultaneously. 
• Title: All tenants acquire title under the same document in a joint tenancy.  
  

As you can see, these four factors apply only to a joint tenancy and not a tenancy in common. Therefore, to remember the difference and the four factors that determine joint tenancy, remember to use the acronym "PITT." 

How Do You Get Out of a Joint Tenancy or Tenancy in Common Contract?

For an individual to terminate a joint tenancy, one of those above factors must be undone. That may be accomplished if one party conveys their joint tenancy interest to a third party, either through sale or gift. Once the joint tenancy has been terminated, a TIC forms between the third party and the remaining co-tenants. Interest may be transferred unilaterally, without any knowledge or consent from other joint tenants.

Tenants in common can get out of a TIC agreement by transferring their property interest to another party. A transfer may be done at any time and in several ways. Tenants in common can do so by gifting, selling, or divesting their interest through a valid will.  

In most cases, a tenant in common may not transfer the property interest of another tenant in common.

Final Thoughts on Difference Between Joint Tenancy vs Tenancy in Common

The best way to remember the difference between a joint tenancy/right of survivorship and a tenancy in common is to enlist the help of the PITT acronym listed above. It is important to remember because there will be several questions on the exam where you will need to know the difference between the two.

Again, in a joint tenancy, the four possession factors of interest, time, and title must be present. In a TIC agreement, parties do not necessarily possess equal rights or equal interest, and they certainly do not have to acquire the property simultaneously or under the same title document. Therefore, PITT separates a joint tenancy from a tenancy in common.