You might be wondering if your funds are up to that task as you go through the steps of buying a house. Even if your credit rating is good enough to get a mortgage, saving for a cash deposit and closing charges can be a difficult and time-consuming task.
And if you’ve always wanted to ease your financial burden and still become a homeowner, you should consider buying a property with another individual under a property joint tenancy agreement. Buying a home with a partner might help you become a homeowner sooner in life, although it comes with its share of demerits.
Definition of property joint tenancy
A legal structure in which two or more persons own a property jointly, each with similar duties and powers, is referred to as joint tenancy. Married and unmarried couples, acquaintances, family, and business associates can all form joint tenancies.
This contractual arrangement creates a claim of longevity, which means that if one of the owners dies, their interest in the property is passed on to the remaining party(s) without the need for probate or the court system.
Joint tenancy agreements refer to a wide range of assets, namely property investment, private property, company ownership, and bank and brokerage accounts, although it is naturally associated with homeownership.
Processing of joint tenancy
The term property joint tenancy refers to a type of homeownership that is commonly linked with real estate. A deed is formed when multiple parties come through at the same moment to make a legally enforceable contract with one another. These individuals could be family members, friends, or even business associates. Consider the case of an unmarried couple who buys a home and chooses dual tenancy at the time of purchase, they will both be listed as co-proprietors on the property deed.
And because each partner has a claim to the property, the profits are also shared with each participant being entitled to a 50 percent portion of the profits if they opt to rent the residence to another person or sell the property.
However, because of their relationship, they are both jointly responsible for the property’s upkeep, comprising loan repayments, property taxes, and maintenance. If one partner fails to meet their financial responsibilities, the other must bear the consequences.
This agreement also establishes a so-called right of survivorship. This means that if one party dies, the property is immediately transferred to the other. Probate and the transfer of a late individual’s assets to an estate are no longer required. Probate courts determine whether a person’s will is legitimate and divide the properties among the deceased’s beneficiaries.
The Benefits and Drawbacks of Joint Tenancy
Although joint tenancy has a lot of benefits, it also has some drawbacks that should be addressed before committing to the agreement.
It eliminates the hassles of clearing the property through an estate via a will as long as one joint tenant remains.
When a person dies, their will usually goes through probate, which is a legal process in which the courts review and validate the will. When a person dies, their assets are typically unavailable to the survivor until probate is completed.
If a person does not identify beneficiaries or does not have a will, the probate process can help establish how their assets are dispersed. However, a combined tenancy bypasses probate and the lengthy legal process by allowing the joint tenant to take on additional responsibilities.
In addition to distributing the estate’s rewards, all members in a joint tenancy are equally responsible for it. For instance, one partner cannot take out a mortgage loan on the house and leave the burden to their partner. The joint tenancy covers all of the valuables as well as the debts, which means that if the property is financed, both parties are accountable for the borrowed funds.
Disadvantages of joint tenancy
A shared tenancy can be complicated by divorce or marital troubles and due to this both partners are responsible for all debts, and neither can sell jointly owned assets without the approval of the other.
An additional downside of joint tenancy is how the asset is handled if one or more of the co-tenants passes away. Because dual tenancy vests all rights in the survivor, even if the departed intended to leave property’s value to predefined beneficiaries, the survivor is under no legal responsibility to do so.
Comparison between tenancy in common and joint tenancy
Some joint owners choose tenancy in common (JTIC) instead of joint tenancy to prevent losing control of the property’s disposition after death. Tenancy in common provides for percentage-based ownership, and shares and tenants can be transferred and added at any time during the arrangement’s life cycle rather than just at the start. That is, unlike joint tenancy, the assets do not automatically pass to the surviving spouse upon death; rather, tenancy in common allows the assets to be dispersed according to the terms of the will.
In conclusion, just as joint tenancy helps you buy real estate faster, it is equally vital to remember that splitting the property and all of the duties that come with it means sharing the property and all of the liabilities as well.
Therefore, the fact that you have equal rights to the property and are responsible for the same debts, you must trust the person(s) with whom you establish a joint tenancy arrangement.