Joint Tenancy vs. Tenancy-in-Common

When you purchase a property with another person, you have a choice as to whether you want to own the property as joint tenants or as tenants-in-common. For a joint tenancy to exist, four characteristics (or “unities”) must exist: the holding of each joint tenant must be equal in nature, extension, and duration (unity of interest); they must arise from the same act or instrument (unity of title); they must arise at the same time (unity of time); their rights must relate to the same piece of property (unity of possession)[i] The ownership in joint tenancy must be explicitly stated on the title or the transfer.

Where title is held by two people as "joint tenants" and one of the owners dies, the other owner becomes the sole owner of the Property.  (The joint tenant has what is called a “right of survivorship”; basically, the surviving joint tenant inherits the whole property. Usually spouses will hold title to a property in joint tenancy.)  However, where title is held as "tenants in common" and one of the owners dies, the deceased owner's interest (his or her portion) passes to his/her beneficiaries under his/her will or, if there is no will, to his/her heirs in accordance with intestacy law. Basically, under a tenancy-in-common, the interest in the property forms part of your estate and is distributed as the rest of your estate is distributed.

Conversely, with joint tenancy the whole property is jointly owned i.e. there is no percentage of ownership for each owner while with tenancy in common, you can divide the ownership any way you like for e.g. 50% - 50% ownership, 90% - 10% ownership, 75% - 25% ownership but there is no right of survivorship, so a grant of probate from the Court of Queen’s Bench would be necessary to pass your interest to your heirs.

When there are more than two owners there are three title/ownership options: 1) all of the owners can be on title as joint tenants with each other 2) all of the owners can hold title as tenants-in-common 3) some of the owners could hold title in joint tenancy with other owners  and the remaining owners could  hold as tenants-in-common with the joint tenants.

If no ownership is indicated on a title, the default is a tenancy in common. A joint tenancy can only be created if the title explicitly has the words, “joint tenancy” on the title.   Therefore, it is very important that if you wish to hold a property as joint tenants that it be expressly stated on the title.  One of the advantages of holding property in joint tenancy is that upon the death of one owner, no probate is required to transfer the property into the names of the co-owners.  (Keep in mind that the title only goes to the co-owners not the heirs of the deceased owner. If the heirs and the surviving owners are different people, then joint ownership may not be the way you want to hold title.)  Upon the death of a co-owner, the surviving co-owners must submit a declaration to the Land Titles Office with a copy of the deceased owner’s death certificate and the title is changed by removing the deceased owner’s name from the title.  In contrast, for a tenancy-in-common,  a probate application is required to transfer the deceased owner’s interest in the property to his or her heirs. 

For example, Anne and Bob are a married couple and they purchase a property and register the title as joint tenants.  If Anne dies before Bob, Bob becomes the owner of Anne’s interest by right of survivorship. If Bob dies before Anne, Anne becomes the owner of Bob’s interest by right of survivorship and Bob must submit a declaration at the Land Titles Office to change the title to stand solely in his name.  When they both die, the last survivor, will pass the property to his or her heirs.

On the other hand if  Anne and Bob purchase a property and register the title as tenants-in-common with a 50% interest each and Anne dies before Bob, Anne’s 50% interest goes to her heirs.  Now, if Anne’s will states that her estate is to be divided with 90% going to Bob and 10% to XYZ charity, Bob will not receive the entire 50% that belonged to Anne. Anne’s will will also have to be probated before Bob can receive his inheritance from Anne’s estate.

Severing a joint tenancy

A joint tenancy can be severed by a person acting on his or her own share, by a mutual agreement, or by any course of dealing sufficient to make known that the interests of all were mutually treated as constituting a tenancy in common.

[i] Definition from Bruce Ziff , Principles of Property Law, 3rd edition (Scarborough, ON: Carswell, 2000) at 302

What is a Real Property Report?

A Real Property Report (RPR) is a survey completed by a land surveyor (a member of the Alberta Land Surveyors Association).  The RPR shows the visible improvements made to the property and the property’s boundaries. As per the current standard Alberta Real Estate Association (AREA) contract, a RPR has to be provided by the Seller of a property to the Buyer of the property or the Buyer’s lawyer giving the buyer or buyer’s lawyer a “reasonable time to review the RPR prior to submitting the transfer documents to the Land Titles Office”.  Further, the standard AREA contract has a warranty that the seller warrants that all buildings and improvements are on the land and not on any easements, rights-of-way, or neighbouring lands. A Real Property Report is the only way to verify this warranty.

The key characteristic of the Real Property Report (RPR) is that it should be up to date i.e. the RPR should reflect any changes/additions to the property. Does the RPR represent the state of the property as it is now i.e. does it show all fences, decks, garages, driveways, sheds, patios, eaves, cantilevers, air conditioning units etc. that are on the property? If not, the Seller must provide a new RPR with evidence of municipal compliance. If the RPR has been completed recently it usually shows all improvements. (Buyers need to be careful to ensure that the Seller has ordered a RPR after a deck or fence has been built or after changes were made to the property.)  The RPR should be compared with the actual site/property to make sure improvements that are on the property are shown on the RPR. If a fence or deck has been removed, it does not need to be shown on the RPR but if one has been added, it must be shown on the RPR.

Why have a Real Property Report?

Without a Real Property Report and Certificate of Compliance, it cannot be ascertained whether the buildings and structures purchased are located within the boundaries of the Property; whether the Property is free from encroachments by buildings or structures on adjoining properties, on easements or on rights of way; or that the property complies with applicable zoning regulations. Only an up-to-date RPR provides that security.

Buyers often ask if title insurance can be purchased in lieu of a RPR. Title insurance will only cover certain defects and will only give you financial protection if problems arise in the future. Title insurance policies have exclusions and exceptions. For example, most title insurers will not provide insurance coverage for an encroachment on to the property unless a government authority requires that the encroachment be removed.  If a structure from your property encroaches on to a neighbour’s property, the neighbour will ask to have the structure removed, not a government authority. Therefore, title insurance would not cover the removal of the structure and the owner would have to pay the costs for the removal or the costs for remedying the encroachment.   Alternatively, an RPR provides information about property compliance issues up front so issues can be dealt with before closing. Buyers  may want to have an RPR along with title insurance coverage as title insurance may cover internal non-compliance issues that do not show on an RPR  (such as lack of building permits or failure to meet building code on renovations).

When should you order a Real Property Report?

At the time of listing the property, the Seller should locate the RPR. If the RPR cannot be found, a new RPR should be ordered, as soon as possible. Survey companies can take up to three weeks to survey properties and complete the RPR.  Ordering a rush RPR will incur additional costs. After the survey is completed, it must be submitted to the municipality for compliance. This process can take an additional week or two. The sooner the RPR can be ordered and submitted for compliance, the sooner the Seller and the listing agent can review it to ensure that there are no problems with encroachments or zoning or remedy any problems that are required to be resolved.