Understanding Tenants In Common

When two or more individuals buy a property or transfer title, they must understand how they are reflected on title. As there can be confusing terminology, property owners may be uncertain on how to hold title to their assets. In Alberta and in many other jurisdictions, if you own property with one or more individuals, you can own property either through joint tenancy or tenancy in common. Each form of ownership has significant consequences on where the property passes to if the owners divorce each other or one of the owners passes away. Keep reading to learn more about tenants in common.

What is Tenancy In Common?

Tenancy in common is a form of joint possession of real property. Each tenant in common possess a share of the property. When two ore more individuals share title to the property under Tenancy in Common, if an owner dies, the deceased owner’s share transfers to the beneficiaries of their estate rather than to the other owners. This means the property is dealt with through the deceased’s will. If no will exists, then the rules of intestacy (which applies when an individual dies without a will) apply.

Unlike joint tenants, tenants in common may each own different percentage shares of the property. In other words, you can have 49 percent interest in the property or even 1 percent interest. Tenants in common may also create interest at different times. Thus, a new owner may create an interest in the property years after the other owners create joint tenancy. In contrast, joint tenants must obtain equal shares of the property at the same time under the same deed. Learn more with our video on tenancy in common.

Why Hold Property As Tenants In Common?

For individuals that own properties with others for investment purposes or those that are purchasing property with others that they are not related to, they may not want to leave their share to the other owners on title when they pass away. In such cases, it is important that the amount each owner is paying and the percentage of ownership each owner has is reflected before the purchase is made to avoid delaying the closing process.

How Is Each Owner’s Interest Specified Under Tenancy In Common?

On title, there is no allocation of which owner has what interest unless expressly defined in the document creating the tenancy in common. One method of defining interests is having each owner declare their proportionate interests through a statutory declaration. If tenants in common desire to change their proportionate interests, their interests must be transferred.

If each owner’s portion of their interests are not specified on the land title certificate, the law presumes that each owner has equal shares.

If Title Does Not Specify Tenancy, What Is The Default Ownership?

If the ownership or title document is silent about the nature of the ownership, as a general rule, under Alberta law:

• for personal property such as vehicles, bank accounts, and investments, ownership is presumed to be under joint tenancy; and
• for real property such as a house, ownership is presumed to be under tenancy in common.

How To Change Ownership From Joint Tenancy To Tenants In Common?

In some instances, owners of a property believe that they have entered into joint tenancy. At a later time, they then discover that the joint tenancy was not

created. Alternatively they discover it was severed without their knowledge. In order for joint tenancy to be maintained, the four unities must exist at the time the property is transferred and throughout the entire duration of the co-ownership including:

• Unity of title – transferring property to joint tenancy must happen under the same legal instrument;
• Unity of interest – the interest of each joint tenant must be exactly identical in nature, duration and extent;
• Unity of Possession – each joint tenant must have an undivided possession of the entire property; and
• Unity of time – the interest of each joint tenant must take effect at the same time.

If any of the four unities are broken during the co-ownership, the joint tenancy is severed or broken. Ownership then reverts to tenancy in common. Therefore if one joint tenant transfers or mortgages their interest to himself or herself, this severs joint tenancy. This means that each owner then becomes a tenant in common.

It is important to understand that a joint tenant can sever joint tenancy without your consent or knowledge by transferring interest to themselves or to someone else. As a result, upon the death of that owner, their portion of the ownership passes to their estate rather than back to the owners.

Alberta Real Estate Lawyers

As there are important consequences when choosing between joint tenancy or tenancy in common, you should speak with a real estate lawyer before making your decision. Our real estate group at Kahane Law is happy to help ensure you make an informed decisions regarding property ownership. Call us today at 403-225-8810 in Calgary, Alberta, or email us directly here.