What is tenancy?/What is tenancy in common?/Joint Tenancy

What is tenancy?

Where two or more persons take an estate or interest in land by means of an application, transfer, mortgage, charge or lease that dealing must state whether the persons are to hold as joint tenants or tenants in common. If they hold as tenants in common the share of each person must also be stated.[1]

What is tenancy in common?

A tenancy held by two or more people, in equal or unequal shares, each person having an equal right of possession over the entire property, but no right of survivorship.[2]

According to the Land Act of Kenya 2012 tenancy in common is a form of concurrent ownership of land in which two or more persons possess the land simultaneously where each person holds an individual, undivided interest in the property and each party has the right to alienate, or transfer their interest.[3]

Tenants in common do not possess a right of survivorship and on their death their interest passes according to the terms of their will.[4]

Tenant in common holds an undivided share in the property and has unity of possession meaning that; each tenant has a right to possession of the property as a whole but none of them has a right to exclusive possession of any part of the property. A tenant in common may do whatever it is that they want to with their share of the property and this will not affect the tenancy of the other co-tenants in their shares.

In tenancy in common each tenant has a right to possess and use the entire property. Either party may sell or transfer his or her share of the property to any person, for any reason. If one of the tenants does sell or transfer his or her share, then the buyer takes the seller’s place and becomes a tenant-in-common with the party who did not sell his or her share.[5]

For a tenancy in common to be in existence the following must be observable or in other words it must comprise the following. First an interest in property owned concurrently by two or more persons under an agreement of tenancy in common. Each or two or more of the tenants in common must have an undivided interest in the whole property for the duration of the tenancy (right of possession) and there has to be no right of survivorship incident to a tenancy in common, but a remainder may be created to vest ownership in the survivor of several persons who own as tenants in common other preceding interests in the same property. [6] All decisions to develop, mortgage, sell or use the property may only be made collectively by all co owners.

Tenancy in common has various advantages and these are, firstly that it allows an unlimited number of people to co-own a property this therefore means that in case of expensive property they can share the purchase price and can benefit from the use of the property. Secondly the co-owners are allowed to divide the property in any agreeable manner which is not the case in a joint tenancy this means that for example in the case of three co owners person X can own 50%, Y 30% and Z 20%.

Tenancy in common has the advantage of the fact that each owner in a tenancy in common has the right to designate an heir in her will. If an owner passes away, her share of the property passes to the person listed in the will, which allows you to provide a property inheritance, increasing your heir's assets when you pass away. If the property produces income, the heir will receive your portion of the income. This advantage extends to persons who were married and had children in the previous marriage they can inherit your share whilst still allowing your current spouse or partner to live there for life.

The fact that one of the features of a tenancy in common is undivided interests this can be both an advantage and disadvantage. Undivided interests refer to the interest in property owned by tenants whereby each tenant has an equal right to enjoy the entire property. This is because tenants to the property may have contributed different portions towards acquiring the ownership of the property (X 50%, Y 30%, and Z 20%) but still have equal enjoyment to the property and in decision making.

For everything that has advantages disadvantages may inevitably also accompany those advantages. One of the disadvantages of tenancy in common is the potential for one owner's nonpayment of the mortgage, upkeep expenses or repair costs to affect the other owners. If one owner fails to make a payment, the other owners must cover the expenses, although they may do so in the form of a loan to the nonpaying owner. If the nonpayment cannot be resolved, the remaining owners typically must resort to complex legal strategies, such as foreclosure or eviction.

The other disadvantage of tenancy in common lies on its dissolution. Dissolution of a tenancy in common can be a complex matter. If all owners agree to sell the property, they divide the proceeds according to ownership. However, if the owners do not agree to sell, one owner can typically obtain a partition action, which is a court order forcing the sale of the property. This can be a disadvantage if you want to keep the property but another owner wants to sell.

There are several ways in which a tenancy in common can come to an end. The first and most obvious way is when the property is sold (with all the shares) to another person. This means that when all the co-owners have met an agreed to sell their share in the tenancy in common to another person. A tenancy in common is not dissolved by death of a co-owner of the tenancy in common.

The tenancy in common may also come to an end when one owner acquires all the share of the property. This simply means that the other co-owners sell their shares or interests in the property to one person in the tenancy in common. An example would be persons Y and Z who own 30% and 20% respectively of the property in the tenancy in common and sell their shares to person X who owns 50% of the tenancy in common.

Dissolution of a tenancy in common can also take place when the co-owners make an agreement and change the form of tenancy. Having earlier stated that concurrent ownership may take two forms, a joint tenancy and a tenancy in common, the agreement that would lead to dissolution of the tenancy in common by way of change of the form of tenancy, would then be an agreement to become a beneficial joint tenancy.

Joint Tenancy

Joint tenants, on the other hand, must obtain equal shares of the property with the same deed, at the same time. The terms of either a joint tenancy or tenancy in common are outlined in the deed, title, or other legally binding property ownership document. The default ownership for married couples is joint tenancy in some states, and tenancy in common in others

Terminating Joint Tenancy vs. Tenancy in Common

A joint tenancy can be broken if one of the co-owners transfers or sells his or her interest to another person, thus changing the ownership arrangement to a tenancy in common for all parties.

A tenancy in common can be broken if one of the following occurs:

One or more co-tenants buys out the others

The property is sold and the proceeds distributed amongst the owners

A partition action is filed, which allows an heir to sell his or her stake. At this point, former tenants in common can choose to enter into a joint tenancy via written instrument if they so desire.

This type of holding title is most common between husbands and wives and among family members in general since it allows the property to pass to the survivors without going through probate (saving time and money).

Right of Survivorship

One of the main differences between the two types of shared ownership is what happens to the property when one of the owners dies.

When a property is owned by joint tenants, the interest of a deceased owner gets transferred to the remaining surviving owners. For example, if three joint tenants own a house and one of them dies, the two remaining tenants each obtain a one-half share of the property. This is called the right of survivorship.

Tenants in common have no rights of survivorship. Unless the deceased owner's will or other instrument specifies that their interest in the property is to be divided among the surviving owners, a deceased person's interest belongs to the estate.