When you decide to purchase property with other owners you must consider how each owner will be reflected on title. The same is true when you add another owner to the title of a property. For properties with multiple owners, there are two ways to own property, through joint tenancy or tenancy in common. Choosing between these two forms of ownership can have vast implications. These include where the property passes to on the death of one of the owners. It also affects property division after a divorce and tax consequences. Read on to learn about joint tenancy or call the real estate lawyers at Kahane Law Office in Calgary for help.
What Are Joint Tenants?
Co-owners who hold property as joint tenants each have identical shares of interest, rights of possession and durations of interest in the property. As such, the law sees joint tenants as a single owner for legal purposes. To learn more about joint tenancy and tenancy in common, watch our YouTube video by clicking here.
Why Hold Property in Joint Tenancy?
For co-owners who have estate planning in mind or for spouses purchasing property together, the norm is joint tenancy over tenancy in common. Owning property as joint tenants is similar to providing a gift. You are giving up some value and control of the property to the other joint owner(s). Joint tenancy invokes the right of survivorship. This means that, upon the death of one of the owners on title, the surviving owners automatically acquire the deceased owner’s interest in the property in equal shares. In contrast, with tenancy in common, the deceased owner’s interest passes to his or her estate.
For co-owners who desire to hold property for the purposes of estate planning, choosing joint tenancy may be advantageous due to ease of the automatic transfer of ownership to surviving co-owners, the elimination of the need to apply for probate and pay probate taxes on the joint property and the avoidance of complicated property transfers by the deceased owner’s estate. Often times, parents will describe themselves and their children as joint tenants on title to avoid the probate process. While adding a joint tenant to your property’s title may be beneficial to avoid probate, there are also risks in adding on a joint tenant, including increased income taxes and family disputes .
What Are the Risks of Holding Property in Joint Tenancy?
Risks exist with joint tenancy ownership of property, including tax considerations. For example, if after transferring ownership into joint ownership the new owner earns income on the property, the new owner will have to pay taxes on some of that income proportionate to their interest unless the new owner is the spouse or a minor of the original owner in which case, the income will be attributed back to the original owner.
Further, it is important to note that joint tenancy impedes each co-owners’ ability to deal with the property freely. In particular, prior to selling or remortgaging the property, each co-owner will have to approve. Also, any judgements ordered against any of the co-owners’ property gets attached to the jointly owned property.
Additionally, married people who hold property in joint tenancy must know that, under Alberta’s Matrimonial Property Act (“MPA”), some property is excluded from division upon divorce. This includes inherited property, property gifted from third parties, and pre-marital assets. However, transferring exempt property into joint ownership, creates a presumption of waiving the exemption. This means, in a divorce, there is a division of half the value of the otherwise exempt property equally between spouses. Pre-nuptial agreements mitigate many of the risks associated with holding property in joint tenancy.
How To Sever Joint Tenancy?
There are three ways to sever joint tenancy: (1) by unilaterally selling one’s own interest in the property; (2) by mutual agreement between co-owners; or (3)by providing evidence in court, such as through a co-owner’s will, proving that all co-owners treated the property as a tenancy in common as opposed to a joint tenancy.
If you wish to end joint tenancy, and all co-owners agree to the severance, the process is easy. You just transfer of title from the owners as joint tenancy to the owners as tenants in common. You must register the transfer of title with the Land Titles Office. Alternatively, all co-owners may sign a written agreement stating that they agree to the severance.
All the co-owners do not always agree to severing the tenancy. The owner seeking severance must serve the opposing co-owners stating the intention to sever joint tenancy. This involves a transfer of the share of the property to himself or herself as a tenant in common. The co-owner must submit proof of service on the opposing co-owners to the Land Titles Office. Land titles then issues a new title reflecting the co-owners ownership as tenants in common.
Joint Tenancy Lawyers In Calgary
Given the advantages and disadvantages of joint tenancy, make the decision to hold property in joint tenancy or tenancy in common cautiously.
If you have any questions about joint tenancy, the lawyers at Kahane Law Office would be happy to guide you. We want to ensure that you make informed decisions regarding ownership of your property. Whether you are purchasing property with family members, including your spouse or planning your estate, you should consult with a lawyer to understand the risks and benefits of joint tenancy. Call us today at 403-225-8810 in Calgary, Alberta, we can also be reached toll-free at 1-877-225-8817 or email us here directly.