There are many ways to hold title to real estate. Two of the more common are “Joint Tenants” and “Tenants in Common.” (By the way, ignore the fact that “tenant” usually means a renter as that doesn’t apply in this case.)
Joint Tenants each own 100% of the property together. Tenants in Common will each own a percentage. It could be 50/50, 70/30, or some other percentage, and there can even be more than two tenants.
With Joint Tenants, it takes BOTH parties to agree to sell the property or to pledge it as collateral to secure a mortgage or home equity line of credit. In Tenants in Common, it’s possible for one of the tenants to sell their interest in the property, or to put their share up as collateral for a loan. In that case, the other tenant(s) will have no say in the matter.
When one of the tenants in a Joint Tenancy pass away, their interest should pass to the surviving tenant. There is no probate or court action required. When one of the tenants in a Tenants in Common pass away, their interest passes to THEIR heirs.
It may sound like Joint Tenants is “better” than Tenants in Common, but that completely depends on the situation and your goals. If you are buying a rental property with a business partner, you may want to consider Tenants in Common as that can provide you some protection from your partner’s other creditors.
There is also a relatively “new” way to hold real estate called “Community Property With Rights of Survivorship” which is similar to Joint Tenants as explained above but may have some tax benefits to married couples or domestic partners as there can be a “step-up” in tax basis.
I AM NOT AN ATTORNEY OR TAX EXPERT. PLEASE CONSULT ONE FOR YOUR SPECIFIC SITUATION.
If you have questions about real estate, call me at (925) 240-MOVE (6683). Voted “Best of Brentwood” multiple times. To search the MLS for free, go to: www.SharpHomesOnline.com. Sharp Realty. #01245186