Sometimes, situations arise in which you need to buy real estate with one or more partners. For example, you may find an excellent real estate deal, but not have enough cash to purchase it by yourself.
In these situations and more, you need to understand the differences between joint tenancy and tenants in common. While both terms refer to processes where two or more parties can purchase properties together, their differences can be vital in legal cases and ownership disputes.
Joint Tenancy Explained
What is Joint Tenancy?
In a nutshell, joint tenancy is a real estate legal status where two or more tenants jointly have the right of survivorship. More specifically, both parties involved in the deal co-own the property in question. If one of the parties passes away, the remaining party inherits the half previously owned by the deceased.
For example, imagine that you enter a real estate deal with your business partner. Both of you purchase a new building for an upcoming business venture. However, your business partner unexpectedly passes away several weeks after purchasing the property. If you entered into a joint tenancy, your deceased partner’s real estate ownership passes to you.
The key element of joint tenancy is that real estate buyers leave whatever their share of real estate is with the other tenant in the deal, instead of whoever is next in line for ownership. More importantly, the surviving party in a joint tenancy deal becomes the sole owner of the property in the event of a death without the need for a long probate process.
When is Joint Tenancy Used?
Joint tenancy can be an attractive choice when two or more people wish to purchase real estate in a legal partnership or as part of a business transaction. It’s also useful when you want to purchase real estate, but don’t want to involve your spouse, children, or their family members who might otherwise receive your estate in the event of your death.
Joint Tenancy in Arkansas
Under Arkansas law, marital rights do not attach to joint tenancy by default. In other words, if you get married, your spouse doesn’t get the right to your half of a joint tenancy property. You also can’t leave property to others in a will if it has a joint tenant with you. In addition, any joint tenancy with a right of survivorship amendment added to a real estate deed has to be prepared either by or under the supervision of a licensed attorney.
Tenants in Common Explained
What is Tenants in Common?
Tenants in common is the default type of co-ownership in Arkansas. Put simply, if two parties in a real estate purchase want to purchase it together to use as a rental property, they both own the rights to the property. This makes them “tenants in common.” This status has legal applications for the real estate partnership in the event of a sale or death.
If either party in the tenants in common arrangement is married, their spouse has marital rights to the property (also called courtesy rights). For example, if John and Dave want to sell their property, but John has a spouse, the spouse must also be present to sign away marital rights to the property when both John and Dave sign the sales papers.
Furthermore, the “tenants in common” status affects inheritance rights. When two parties are tenants in common for a property, the inheritance of each party’s ownership can be left or specified in a will. In this way, if John dies, his part of the property could be left to his spouse, children, or whoever else he designates the next owner in his will.
When is Tenants in Common Used?
A tenants in common setup might be ideal if two families are very close together and want to jointly own a property. It can also be appropriate if there are two business partners who don’t mind their spouses or families getting control over their share of the real estate later down the road.
The Key Differences Between Joint Tenancy vs. Tenants in Common in Arkansas
Joint tenancy and tenants in common are similar legal statuses for real estate property ownership, but there are some important differences to keep in mind.
With joint tenancy, both owners retain sole ownership of the property in question. Technically, with tenants in common ownership, either tenant’s spouse can claim marital rights to the property. Thus, joint tenancy is better for purely business partnerships (e.g., two business partners purchasing real estate for a business venture).
In a tenants in common situation, a real estate owner’s share of a jointly-owned property can be left to their spouse, children, or other inheritors in the case of that owner’s death. Joint tenancy is the opposite: if one owner dies, their share of the jointly-owned property goes to the other joint tenant.
Contact A Real Estate Lawyer at Milligan Law Offices
From time to time, issues of inheritance or legal ownership can crop up, even if both parties in a real estate partnership follow the rules to the letter. For example, one partner in an arrangement might wonder whether their new spouse has marital rights to a tenants in common real estate property, or if their former spouse has legal rights instead.
In these cases and more, you should contact an experienced real estate attorney right away. It’s a good idea to have one of these attorneys draw up your deeds or real estate paperwork.
If you still aren’t sure whether joint tenancy or tenants in common is the right choice for you, Milligan Law Offices can help. Our knowledgeable attorneys can answer the questions you have, as well as advise you regarding business disputes or matters of inheritance rights that deal with complex property agreements.
Get in touch for an initial consultation by calling Milligan Law Offices at (479) 783-2213 or by contacting us online.