Benefits and Pitfalls of Joint Tenancy with Right of Survivorship and Tenancy in Common in MN:
Co-ownership of property is common but entering co-ownership without knowing some basic details of the different systems of property ownership can be costly. As of 2022, Minnesota has two kinds of property ownership if there are multiple owners: joint tenancy and tenancy-in-common. Under both ownership systems, all owners have a right to access all the property and no single owner can prohibit another owner from any part of the property without their consent.
When owners are tenants-in-common, each owner can own a different percentage of the property, but that specific percentage belongs to that owner. When an owner dies, their ownership percentage of the property passes according to their will, estate plan, or intestacy laws. An owner can transfer their ownership share without the consent of the other owners.
When two or more individuals own property jointly each owner owns an equal share of the property. Joint ownership includes a right to survivorship which means that if one owner dies, their ownership share is automatically transferred to the surviving owner(s). In other words, the survivor has a right to greater ownership. When property is owned jointly, each owner makes up one part of a single “individual” that owns the entire property. If an owner wants to transfer their ownership interest, they can, but, unless specific steps are taken, the new owner will become an owner as a tenant in common with the other joint tenant owners.
Issues can arise in both joint tenancy and tenants-in-common ownership systems.
Under tenancy-in-common, when owners die, there can be an increasing number of owners over one piece of property. Consider the situation in which a deceased owner’s interest passes to multiple children. While this does not necessarily bring the value of each ownership share down, it can make it more complicated to sell or transfer the land, as the consent of each owner is necessary.
Under joint ownership, while an individual joint owner can transfer their interest without consent of the other joint owners, severing the joint tenancy, the sale of any jointly owned land must be agreed to by all joint owners. To sell the land, all the owners need to agree because each owner makes up one part of the “individual” that owns the whole property. Additionally, if a married couple owns property jointly, a decree of dissolution of the marriage will sever the joint ownership and the formerly married couple will own the property as tenants-in-common unless the decree specifically specifies otherwise.
Transfer on death deeds are a powerful and simple way to transfer property. However, they need to be executed carefully considering the differences between property owned by joint ownership and tenancy-in-common.
Practical Implications:
If you are entering into property ownership with other people, it is important to know into which kind of ownership you are entering. The default system in Minnesota is tenancy-in-common, so unless joint ownership is specified on a transfer deed, ownership will be as tenants-in-common. It can be helpful to talk through the legal implications of entering property ownership under either system and if you currently own property jointly or under tenancy-in-common, it is important to know all your options and your co-owner’s options. Contact St. Croix Law for any property ownership questions.
Jacob Grow