Tenancy in Common: What Is It and What Are the Benefits?
Tenancy in common is one of three types of concurrent ownership recognized by Florida courts. Joint tenancy is a term used for when two or more persons own the same asset or property.
To begin, there are two other types of co-ownership:
- Tenants by the entirety. This type of concurrent ownership is available only to married couples. However, if the married couple seeks a divorce, the ownership will be changed to a tenancy in common. A tenancy by the entirety ownership may also be terminated by the death of one spouse or mutual agreement of both parties. This type of joint ownership between spouses provides asset protection to the creditors of an individual spouse.
- Joint tenancy with rights of survivorship. This type of concurrent ownership ensures that the surviving joint owner of the property inherits the property without having to go through probate. There is an understanding that both joint owners own the asset 100%. A joint tenancy can be terminated by mutual agreement between the properties, or if necessary, by an owner’s petition to the appropriate court.
What is the Difference Between Tenancy in Common and Joint Tenancy with rights of survivorship/ Tenants by the Entirety?
With a tenancy by the entirety and a joint tenancy with rights of survivorship, the joint interests of all tenants must be equal, and each tenancy must have an equal right to possess and use the property. With a tenancy in common, each tenant owns a percentage interest that can be transferred or sold, while the ownership shares are not necessarily equal.
While Florida law assumes an equal 50/50 split, the percentage interest can differ upon the mutual agreements of all tenants. Also, tenants in common can transfer their percentage interest through a Will or intestate succession, which is one of the benefits of a tenancy in common ownership.
For example, if you own a 40% share of a property as tenants in common with a business partner, you can transfer your share to any person in your Will (or even before death). Upon your death, the estate will be administered, and your beneficiaries will continue to own a 40% share in the property as tenants in common with your business partner.
Another benefit of a joint tenancy with rights of survivorship (and tenancy by the entirety) is that, unlike other forms of joint ownership, it does not require probate when an owner dies.
Tenancy in Common as the Default Form of Co-Ownership in Florida
In Florida, tenants in common is the default form of concurrent ownership. Unless a deed expressly says that two or more owners are joint tenants “with rights of survivorship” or tenants by the entireties, multiple owners of the same piece of property are considered tenants in common by default.
Also, tenants in common is formed through the termination of one of the other two types of co-ownership in Florida. For example, a joint tenancy with rights of survivorship is terminated if a creditor attaches the property or when one of the owners transfers their interest, even if the interest is being transferred from one tenant to the other.
Since a tenancy by the entirety is a type of joint ownership that is available only to married couples, it can be terminated upon divorce. If people who were tenancy by the entireties get divorced, they automatically become tenants in common. In fact, each spouse owns a 50% share of the property unless their property settlement agreement clearly defines each party’s percentage interest.
If you are unsure whether a tenancy in common can be a beneficial strategy for your estate plan in Florida, consult with a St. Petersburg estate planning attorney. Contact Legacy Protection Lawyers, LLP, to discuss potential pros and cons of being a tenant in common in your particular case. Call at 727-471-5868.