Winsor Law Group Blog

By: Matthew K Palfreyman

For a vast majority of American households, their home is the principal asset of the family.  Yet how many real property owners give significant thought in their closing transactions at the title company as to the form of their ownership?  Joint Tenancy is a very common form of two-party ownership, but it should not be considered as sufficient for general use.

Here is an example of what we mean: Since the last recession, there are more stringent qualifications to qualify for a mortgage. That is why some unique financing strategies have come about to help individuals and families qualify on paper for the homes they are seeking.  So if a parent’s income is used to help qualify for a loan application, most often the parent must also be an owner of record of the property at closing.  If joint tenancy is elected as the form of ownership, that decision has significant legal consequences.  Qualifying to buy a dream home is great, but sometimes the legal consequences of being forced to choose joint tenancy can produce difficult or terrible challenges in the future. 

So what does joint tenancy mean?  It means that the two parties own the whole of the property (and its economic value) together.  That is different than if the property were owned equally as tenants in common, what many people might call 50/50.  This distinction is important from a creditor’s perspective because a joint tenant’s interest is not limited to percentage value of the property, even though the joint owners, between themselves, may view the property’s value as split.  

If you are married to your joint tenant owner, the distinction means very little even from the creditor’s perspective because of Arizona community property rules; however, if the joint tenants are not married that distinction may be a very big deal if either of the owners are having legal problems.   Think of the example above, if the parent joint tenant owner declares bankruptcy that means that the child’s dream house is a non-personal residence financial asset of the parent’s availability to satisfy the bankruptcy creditors.  That dinner table discussion for such a family would probably consider politics as a preferred topic!

However, the Joint Tenancy can be a gift that keeps on giving when coupled with Rights of Survivorship. We will address that in detail in Part 2. [Let’s Get Real About Real Estate: Why Joint Tenancy Is Both Great and Terrible Part 2]

*The information provided in this article is of a general nature and reflects only the opinion of the author at the time it was drafted. It is not intended as definitive legal advice, does not create an attorney-client relationship, and you should not act upon it without seeking independent legal counsel.