When registering ownership on title to a property, it is important for the buyers to give some thought to how they want to hold title to the property and to seek guidance from their lawyer or notary with regards to this matter. Determining what is best in the circumstances includes considerations of what proportionate shares the owners are to hold as well as the nature of the relationship between the property owners. The lender’s requirements should also be considered.
One of the key considerations is whether the property owners wish to hold title as joint tenants or as tenants in common. The key difference between the two is that joint tenancy includes the right of survivorship, whereas tenancy in common does not. The right of survivorship means that the interest held between the joint tenants would flow to the survivor on the death of a registered owner. While this may be subject to challenge in some situations, it is advantageous as it avoids the need to obtain a grant of probate through the Court system to be able to transfer the property to the survivor. As probate is not required, the value of the property would also not be subject to probate, it would also save probate fees on the value of the property. On the other hand, it removes the asset (i.e. the property interest) from the deceased’s estate such that it would not transfer under the deceased’s will.
Another difference between the two methods of registration is the ability to hold various proportionate interests. As joint tenants, the parties must hold equal interests whereas with tenancy in common, the title can be split in appropriate percentages for the circumstances.
In some cases, parties will request to hold title as 99% and 1% owners as tenants in common where one party is eligible for a property transfer tax first time homebuyer exemption and the other is not. This enhances the savings for the parties on the tax payable at the time of purchase, although it does mean that the owners would hold their interests as tenants in common. It is important that this structure be confirmed with the lender who will be taking a mortgage against the property as we do occasionally see mortgage instructions that specify how they require title to be held.
The impact of holding title as tenants in common can be mitigated by a future transfer of the property into joint tenancy. Depending on the circumstances, there may be property transfer tax implications resulting from this transfer so it is important to seek advice regarding the specific matter to ensure the owners are aware of the implications.
The tenancy can also be changed either to convert from joint tenancy to tenancy in common or vice versa by way of a transfer of either one person’s interest or both interests. Of note, the remaining owner does not need to be notified of the change in tenancy from joint tenancy to tenancy in common as it can be done by one owner. As per the Property Law Act (ss. 11 and 12), persons who buy an interest in land together do not automatically take title as joint tenants: the instrument must so state in express terms or the persons will be deemed to be tenants in common
If you would like to learn more about the difference between joint tenancy and tenancy in common or any other real estate matter, please do not hesitate to reach out to our office at (250) 448-2637.
This information is general in nature only. You should consult a lawyer before acting on any of this information. This information should not be considered as legal advice. To learn more about your legal needs, please contact our office at (250) 448-2637 or any of our lawyers practicing in the area of real estate law at the following:Una Gabie: firstname.lastname@example.org Jennette Vopicka: email@example.com Danielle (Dani) Brito: firstname.lastname@example.org