Joint tenancy occurs when two or more people hold title to real estate jointly, with equal rights to enjoy the property during their lives; in the event of the death of one of the partners, their rights of ownership pass to the surviving tenant(s).
The advantage of this method is that the parties in the ownership need not be married or related.
The downside is that any financing or use of the property for financial gain must be approved by all parties and cannot be transferred by will after one passes. If the parties are not married, in order to get out of the title, they must petition the court to divide the property or order its sale.
Another large disadvantage is that a creditor that has a legal judgment to collect a debt from one of the owners can also petition the court to divide the property and force a sale in order to collect on its judgment. In this method, each of the owners takes a risk in the other's financial choices.
Tenancy In Common
With tenancy in common, two or more persons hold title to real estate jointly, with equal rights to enjoy the property during their lives. Unlike joint tenancy, tenants in common hold title individually for their respective part of the property and can dispose of or encumber it at will. Ownership can be willed to other parties, and in the event of death, ownership will transfer to that owner's heirs undivided.
Tenancy in common allows for one owner to use the wealth created by their portion of the property as collateral for financial transactions, and creditors can place liens only against one owner's particular portion of the property.
Any liens on the property must be cleared in order for a total transfer of ownership to take place.
Your lender must advise you what steps are necessary to hold title jointly while obtaining your loan severally. In addition, all of these issues need to be reviewed by your accountant or tax attorney. Bear in mind that once you share title, in California, there may be additional implications if the one who is unencumbered decides to sell, and the other does not.
The Bremner Group at Coldwell Banker