Co-Ownership in Ontario: Joint Tenancy and Tenancy in Common

When you’re married or have a common law partner, owning things jointly is probably a standard aspect of your relationship. Whether it’s sharing a blanket, a Netflix account, or a rescue dog, there are many benefits to legally sharing ownership over certain things.

This is especially true when it comes to owning big-item assets like real estate, financial accounts, and vehicles. Creating joint ownership is an important step in estate planning, since assets that are jointly owned automatically pass on to the surviving member if one of the owners dies.

This means that the assets do not need to go through probate when you’re gone, thereby saving your loved ones time and money. However, there are different types of joint ownership arrangements. Let us break them down.

Table Of Contents

What Is Joint Tenancy?

How does Joint Tenancy work?

Advantages and Disadvantages of Joint Tenancy

What is Tenancy in Common?

How does Tenancy in Common work?

Advantages and Disadvantages of Tenancy in Common

Severance of Joint Tenancy

Joint tenancy is the most common joint ownership arrangement. Basically, it means that you and your spouse or common law partner both own an asset together, as if the two of you were one person.

This means you both have equal rights over the asset, and equal obligations. When one of you passes, then the surviving owner immediately receives full ownership of the asset. This can be a bank account, the deed to a property, a business, or the deed to a vehicle or boat.

Since assets held in joint tenancy belong equally to both parties, it means that all benefits and responsibilities are shared. So if a couple owns a house under a joint tenancy agreement and decides to rent it out, both parties are equally entitled to the income generated by the rent. Similarly, if there are outstanding property taxes or mortgage payments that need to be made, both parties are liable for the payments.

Joint tenancy agreements are also called right-of-survivorship agreements because the asset automatically transfers to the surviving owner once the other passes away. This eliminates the need for the asset to be probated, since an owner already exists.

Joint tenancy has several advantages, including:

• Eliminating the need for probate, thereby saving time and money;
• Helps establish clear distribution path for assets, since ownership is already established;
• Helps ease the grieving period for those left behind, since survivors can stay in their home and have immediate access to any relevant bank accounts.
  

However, there are also certain potential disadvantages that need to be kept in mind, including:

• The surviving owner is liable for any debts associated with the asset, including mortgage payments;
• Assets cannot be sold without consent from both parties, which can be difficult if the owners are divorcing, separated, or in conflict;
• After one owner passes, the surviving owner has complete control over the asset, overriding any of the deceased’s wishes to pass on their share of the asset to an heir.

Tenancy in common is another type of joint ownership arrangement. It describes an arrangement where an asset is owned by two or more individuals together, but without the right of survivorship.

What this means is that the entire asset does not automatically pass over to the surviving owner. Instead, an asset is split, with the owners each having possession of their share. That can be a 50-50 split, but could also be 60-40, 70-30, 80-20, or however else tenants decide to split up ownership.

So if a property is owned via tenancy in common, then the surviving owner only has a right to their share of the property’s value. The deceased’s share does not automatically transfer over to the survivor.

Because ownership is based on percentages of shares, these shares can be traded and the arrangements can be altered throughout the owners’ lifetimes. However, it’s important to point out that all owners are still liable for debts and taxes, similarly to assets owned by joint tenancy. The only difference is that tenants in a tenancy in common agreement can later deduct their share in their tax statements.

When one of the owners dies, they can assign a beneficiary for their share of the property. That beneficiary can be anyone, since the shares don’t automatically go to the owner of the remaining shares. As such, a beneficiary needs to be designated in the owner’s will.

The main advantages to a Tenancy in Common agreement are:

• Maintaining more independence and authority over individual shares of an asset;
• Being able to share the costs of big purchases, such as a real estate purchase, while still determining each individual’s level of involvement and ownership;
• Having the ability to pass on your own shares to whomever you want.

However, there are also key disadvantages to keep in mind:

• Since co-owners can sell their shares and ownership can change, you might find yourself co-owning an asset with someone you don’t get along with;
• You’re still liable for debts and taxes incurred by the asset;
• Since tenancy in common does not include a right of survivorship, a surviving tenant may be left more vulnerable to changes. They might, for example, have to share ownership of a home with surviving adult children, who might want to sell the property or take it over.

Examples of Tenancy in Common

A tenancy in common arrangement tends to be more common for couples who are not married, yet wish to own property together. It’s also more common among friends or families who want to purchase an asset together.

A common example of an asset that’s owned through a tenancy in common agreement is a business. Various partners have ownership in the business, but the amount of shares may vary and each partner has complete authority over their own shares. Once one of the owners dies, their shares don’t automatically go to the surviving owners. Instead, the owner bequeaths their shares to a beneficiary in their will.

In Ontario, it is possible for a joint tenancy to be severed and turned into a tenancy in common agreement instead. This can happen when one or more parties decide that a joint tenancy agreement no longer represents the best option for them.

It only takes one party to sever a joint tenancy. One of the owners can unilaterally decide that they want to dissolve the joint tenancy by transferring their share of the property to themselves, or conversely selling their shares. This would break up the agreement set forth by a joint tenancy.

Joint owners can also unitedly decide they want to severe the joint tenancy, and enter a written agreement that designates the ownership of the asset as a tenancy in common.

Joint tenancy agreements are usually severed and turned into tenancy in common agreements when a married couple decides to separate or divorce, as this can greatly facilitate the separation process.

Joint ownership is a key aspect of comprehensive estate planning. Feeling overwhelmed? Don’t worry, our experts are here to answer any questions you may have about joint ownership in Ontario. Reach out for a free consultation today.