When purchasing real estate in Alberta with a family member, business associate, or another individual or corporation, the manner in which ownership is structured has significant legal and financial implications. The way title is held will determine rights during ownership, succession upon death, and the ability to sell or transfer interest in the property. One of the most fundamental distinctions in property law is between joint tenancy and tenants in common—two ownership structures with very different legal consequences.

For instance, if one owner dies, does their interest pass automatically to the surviving owner(s), or does it become part of their estate and subject to probate? The answer depends on how ownership of the property was initially structured. Understanding these distinctions is crucial for estate planning, creditor protection, and financial decision-making.

Joint Tenancy

Under joint tenancy, each owner holds an equal and undivided interest in the property, regardless of individual financial contributions. A defining characteristic of joint tenancy is the right of survivorship, meaning that upon the death of one joint tenant, their interest automatically transfers to the surviving joint tenant(s), bypassing probate and overriding any provisions in a will. Because of this, joint tenancy is often used as an estate planning tool to streamline property succession.

However, joint tenancy comes with important legal and financial considerations:

• All owners must hold equal interests, even if their financial contributions differ.

• If the property is sold, the proceeds must be divided equally, unless a written agreement specifies otherwise.

• Joint tenancy can be severed, either intentionally or unintentionally, converting ownership into tenants in common.

Severing a Joint Tenancy

A joint tenancy can be severed in several ways, including:

1. By Notice and Registration: A joint tenant can provide written notice of their intention to sever the joint tenancy and register the change with Alberta Land Titles Office. Once this is done, the ownership automatically converts to tenants in common.
2. By Transferring Their Interest: If a joint tenant sells, gifts, or transfers their interest to another person—including transferring it to themselves—the joint tenancy is automatically severed.
3. By Creditor Enforcement: If a joint tenant incurs significant debt, is sued, or declares bankruptcy, a creditor may register a writ against their interest or force a sale. This action automatically severs the joint tenancy, converting it to tenants in common and eliminating the right of survivorship.

A joint tenancy is most commonly used by spouses, long-term partners, and family members who want to ensure a seamless transfer of ownership without requiring a will or probate. However, it is not always the best option, particularly in cases where co-owners have differing financial obligations, estate planning goals, or creditor concerns. Anyone considering joint tenancy should obtain legal advice to ensure it aligns with their long-term objectives.

Tenants in Common

Under a tenants in common ownership structure:

• Each owner holds a distinct and divisible share of the property.

• Shares can be equal or unequal, depending on financial contributions or agreement.

For example, if two investors purchase a property together and one contributes 60% of the funds, their ownership share can be legally registered to reflect that proportion.

Key distinctions include:

• A tenant in common can sell, gift, mortgage, or transfer their individual interest without needing permission from co-owners (unless restricted by agreement).

• There is no right of survivorship. If a tenant in common passes away, their share is distributed through their will or, if none exists, under Alberta’s Wills and Succession Act.

Because of its flexibility, tenants in common is often preferred by:

• Business partners

• Investors

• Individuals seeking control over inheritance

It is particularly useful when owners contribute unequal amounts to the purchase or when they want to ensure their share can be passed to specific beneficiaries rather than co-owners. However, given that disputes can arise regarding the use, management, or sale of the property, co-owners should consider drafting a co-ownership agreement to clearly outline their rights and responsibilities.

Choosing the Right Ownership Structure

Selecting the right structure depends on your long-term goals and estate planning needs:

• Want to avoid probate and ensure a smooth transfer upon death? → Consider joint tenancy.

• Want to reflect unequal contributions or maintain inheritance control? → Tenants in common may be best.

Regardless of structure, a co-ownership agreement offers clarity by outlining:

• Each owner’s rights

• Financial responsibilities

• Procedures for selling or transferring ownership

These agreements are particularly valuable in both joint tenancy and tenants in common arrangements to reduce disputes and protect each owner’s interests.

Additionally, because tenants in common do not have the right of survivorship, it is essential for each owner to have a valid will to ensure their share is passed to their intended beneficiaries rather than being distributed under Alberta’s Wills and Succession Act. Our team can assist with both co-ownership agreements and estate planning, including drafting wills, to ensure your property is structured in alignment with your goals.