It became official when the U.S. Census Bureau released its Current Population Survey in 2010: most adults aren't sharing a home with a spouse. Married couples headed up less than 50 percent of American households in the survey. If you combine this trend with buying – not renting – a property, the type of property ownership you choose with your partner can have a lot of implications.
Even if you're young and you're planning to be around for some time to come, survivorship is a major distinction between joint tenancy and holding title as tenants in common. If your partner should die and you own the property as joint tenants, you inherit the house. Even if he left his ownership share to someone else in his will, the deed to your home overrides this. If you took title as tenants in common, you would only inherit if he left the property to you in his will or as part of a living trust. If he doesn't leave a will or a trust, his ownership interest would pass to his next of kin -- and if that's not you, you'd find yourself owning the property with a new tenant in common. According to the American Bar Association, most unmarried couples elect to hold title as joint tenants with rights of survivorship.
Tenants in common each own a specified percentage of the property. This might be the case if you purchased a home with a friend, but she had significantly more savings and made the down payment, while you're only contributing to the mortgage. For example, she might have 75 percent ownership, while you only have 25 percent. The division could also be 50-50 or anything else. Joint tenants on the other hand both equally own the house. Both forms of ownership allow you to transfer your interest to a third party without your co-owner's consent, but if joint tenants do this, ownership changes to a tenancy in common, assuming there are only two of you. If the property has three or more owners, the original owners remain joint tenants with each other and they retain their rights of survivorship – but they would only inherit each other's shares, not that of the new tenant.
If you're worried about your co-owner's creditors or his borrowing tendencies, taking title as joint tenants will offer you a bit more protection. If you hold title as tenants in common, your co-owner can take a mortgage against his share of the property without your knowledge or consent – although he'd have to find a lender willing to secure the loan by only his percentage of the property. Joint tenants can also take a mortgage against their ownership shares, but they need the other owner's approval. A joint tenancy allows your co-owner's creditors to place judgment liens against your home, and the same holds true for tenancies in common.
If you and your partner decide to go your separate ways, your options for ending ownership are much the same whether you're tenants in common or joint tenants. One of you can buy out the other's interest, or you can collectively sell the entire property to a third party. If you're not in agreement, you'll have to file a partition lawsuit to request that a judge order the property's sale. You would then divide the proceeds according to your ownership interests. Your creditors have the same option if they get a judgment lien against the property. They can force the sale of the home and recover their money from the debtor owner's share.
- Law Offices of Edward J. Danhires: Forms of Property Ownership
- Massachusetts Association of Realtors: Co-Ownership of Real Property
- Iowa State University Extension and Outreach: Forms of Property Ownership
- American Bar Association: Home Ownership and Unmarried Couples
- Law Office of Steve Samson: Holding Property in Joint Tenancy Creates More Problems Than it Solves
Beverly Bird has been writing professionally for over 30 years. She is also a paralegal, specializing in areas of personal finance, bankruptcy and estate law. She writes as the tax expert for The Balance.