In a previous post, we discussed the most common ways that people can take title to property. In particular, sole ownership, joint tenants, and tenancies in common were held out as the most common forms of residential property ownership.
The way you take title to a property is usually an issue when there is more than one owner. The way that you own the property will determine what you can do with the portion that own, or your ‘interest’ in the property. Two people who own a property as joint tenants each own a 50% interest in the property and the survivorship aspect of this relationship means that should one of the parties die, their 50% will pass directly to the other joint tenant.
What happens if one joint tenant converts their interest to a tenancy in common? This means that the half interest does not pass directly to the surviving tenant. In fact, it means that the person who died can leave their half of the property to whomever they want.
A joint tenant can convert their interest (change it from a joint tenancy to a tenancy in common) without the knowledge or consent of the other joint tenant and it is perfectly legal to do so.
Assume we are talking about spouses – Sam and Steve were married in August and purchased a home together in September. They took title to the property as joint tenants and assumed that if one of them were to die, the other would naturally inherit the other’s interest.
In December, Steve began having suspicions that Sam wasn’t being faithful to the relationship. Steve went to his lawyer and asked that the joint tenancy be severed, that the property be registered as a tenancy in common. Steve then made a new will and left his half of the house to his favourite charity. Steve, in an untimely skiing accident, dies. Imagine Sam’s shock to realize that Steve’s half equity is going to the charity.
All this to say that joint tenancy can be a great planning tool for people who are certain they want their interest in a property to pass to each other upon death – but there is nothing absolute about this. Either of the parties can decide to sever the joint tenancy and they do not require the permission of the other joint tenant to do it.