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 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 may also need to 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 automatic 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 limited situations, it is advantageous as it avoids the need to obtain a grant of probate through the Courts 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 are deemed to hold equal interests, whereas with tenancy in common, the title can be split in appropriate percentages for the circumstances.
Historically it was common for parties to hold title as 99% and 1% owners as tenants in common where one party was eligible for a property transfer tax first time homebuyer exemption and the other was not. This structure is no longer considered acceptable, if the sole reason for considering it is for tax savings, given that this is generally not permitted under the Property Transfer Tax Act. If the party’s circumstances do warrant considering this avenue, those circumstances would need to be carefully reviewed with the lawyer.
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. Tenants in common is the default position when registering a transfer at the Land Title Office; the instrument must state in express terms they wish to take title as Joint Tenants.
However the parties decide to own property together, whether as Joint Tenants or Tenants-in-Common, people should still get their will and other estate planning documents done. At some point in time, there will just be one sole owner of that property and some advanced planning can ensure that the parties plan for their intended wishes.
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.