Life and the Law | Joint tenancy vs tenancy in common?

It is not uncommon for ­several persons, whether it be a ­relative or friend or even a ­business partner, to purchase a property together. When ­acquiring property, one critical consideration is how the ­property shall be owned. There are two different types of tenancy. These are known as joint tenancy and ­tenancy in common.

Joint tenancy is when two or more persons hold the property jointly with no divisible share, and the rule of survivorship applies that it is the last survivor who owns the property. Tenancy in common is when each owner owns a ­distinct share in the property and on the death of an owner, that share becomes a part of his or her estate.

Tenants in common can own property in equal shares or unequal shares. Where proportion is not stated, the presumption is that they own the property in equal shares, that is, 50/50.

In order to determine the type of tenancy to choose, one must look at the pros and cons.

Typically, when a husband and wife purchase property, they usually hold it as joint tenants. However, if the spouses have ­children from a previous ­relationship they may opt for tenancy in common to have the option to leave their interest in a will for their child/children.

Similarly, where a person ­purchases property with a friend or business partner, especially for investment purposes, the better option is tenancy in common. Also, where one owner contributes more to the purchase price, then the most suitable type of tenancy would be tenancy in common in unequal shares, where the amounts contributed by each owner would be used to inform the interest each person has.

On the death of a joint ­tenant, the interest of the deceased co-owner passes to the ­surviving co-owner(s) and as such, all the surviving co-owner has to do is to note the death of the joint ­tenant on the certificate of title. This is so that the certificate of title reflects the true state of affairs with regard to ownership. The application to note death along with the Revenue Affidavit are lodged with the Stamp Office for the death duties to be assessed.

FULL EXEMPTION

Once the premises is the ­principal place of residence of the deceased and also that of the survivor, the survivor is able to access a full exemption from death duties. Where the exemption does not apply, death duties amounting to 1.5 per cent of the value of the interest is payable on such amount of the interest over and above $10 million. As at April 1, 2019, where the value of the interest is $10 million or less, no death duties are payable.

However, where property is owned as tenants in common, pursuant to Section 5 of the Real Property Representative Act, the share of the deceased owner will vest in his/her personal representative. Consequently, the personal representative of the deceased co-owner must apply to have his name registered on title in order to deal in the property.

The personal representative will first have to obtain a grant of probate or letters of administration in the deceased estate.

There is a big difference in the cost to note the death as opposed to obtaining a grant of representation. The cost to file an application to note death is a fixed legal cost plus 1.5 per cent of the value of the interest over and above $1 million. The cost to obtain a grant, however, is dependent on the value of the estate plus the costs of stamping the grant itself and payment of death duties, if applicable. Similarly, the time it takes to complete an application to note death is far less than the time to obtain a grant of representation.

Finally, it is important to note that at any time the owners can agree to apply to change the ­tenancy. There is a minimal cost for stamping at the Tax Administration Jamaica and for ­registration. If the owners are unable to come to an agreement, then the joint owner can sever the joint tenancy by transferring their interest to someone who is not on the title. Upon receipt of a transfer in the name of one joint owner only, the registrar will treat the transfer as an act of severance of the joint tenancy by the transferor and effect the transfer.

Because there are distinct ­implications from the type of ownership, persons seeking to acquire property with someone else must consider which type of tenancy would be most suitable. This is so especially in light of the fact that if no tenancy is stated, the registrar will assume joint tenancy.

Knowledge is always power.

- Krishna-kay Lawrence is an associate at Karene N. Stanley & Co. klawrence@knscolaw.com