Property Ownership In Arizona: Dangers and Risks of Joint Tenancy

Do you own real estate property in Arizona with someone else? If so, there is a very good chance that you own it as joint tenants with right of survivorship, often referred to as “JTWROS” and pronounced ‘jit-wross’. Especially for couples (whether married or not), JTWROS is often favored in the real estate community because it provides that the property’s title will automatically pass to the remaining partner/owner without requiring probate, so that they are not potentially rendered homeless upon the death of the other. Without this right of survivability, the interest in the property would revert to the decedent’s estate, leading to all sorts of possible problems that may result in litigation.

However, the protections afforded by JTWROS are scanty and can be easily destroyed.  In fact, for married couples, a far stronger manner to hold title to property is as community property with right of survivorship, or “CPWROS.” In Arizona, at least, CPWROS titles are not defeasible except with signatures of both owners, according to A.R.S. § 33-452.  Also see A.R.S. § 33-431(D), which, amongst other things, expressly provides that the community interest of the parties is not extinguished. Lamentably, unmarried couples cannot hold title in CPWROS, so they are left with the far weaker JTWROS to protect their interests.

A joint tenant is therefore unfortunately free to convey (sell), encumber (mortgage), devise (will) or otherwise alienate their interest in the joint tenancy. In fact, this can be done legally without the other joint tenant’s signature, meaning that this can occur and the other joint tenant(s) would know nothing about it. To use an analogy, it is as if the remaining joint tenants, asleep in first class high up in the Titanic, don’t even know their ship has struck an iceberg and is now sinking.

Some states may view the actions by a joint tenant as set forth above as a severance of the joint tenancy, because it technically violates one of the four entities, namely that of time (all joint tenants must come into title at the same time).  Other states might look to the actual intent of the conveying joint tenant. The only protection provided is against beneficiary deeds as set forth in A.R.S. § 33-405(D), but other methods of conveyancing are expressly not included.

See A.R.S. § 33-405(H). Regardless, state legislatures need to rectify this problem with JTWROS. A joint tenant should not be able to convey, devise or encumber their interest because it:

1) defeats the entire purpose of JTWROS, which is survivability of the property, and 2) their interest really is of the whole, and the whole should not be severable in a sneak attack like this.

It is especially galling (and, I would argue - against public policy) that joint tenants can do this WITHOUT THE OTHER JOINT TENANT KNOWING ABOUT IT. Certainly when there is mass confusion amongst realtors, mortgage lenders and title companies as to this issue, a joint tenant should not have to depend on the goodwill of any of these other parties alien to the arrangement to protect the joint tenant’s often huge financial interests. For most Americans, the equity in their home is their single largest asset.

Destruction of the joint tenancy will result in the co-tenants becoming tenants in common.

Tenants in common do not enjoy any survivability aspect to the title. At that point, you as the non-severing joint tenant legally are a cotenant with whom you thought to be your partner.

For example, if A and B are joint tenants, but B conveys his interest to C, B’s mother, A and C become co-tenants in a tenants in common estate, not joint tenants. A’s interest in the property (in this case, 50%) will pass to A’s heirs upon death, B’s interest is exterminated and C’s interest (also 50%) will pass to C’s heirs upon death. A partition action can be filed by either party (in his hypothetical, either A or C) to get the property either bought out by the remaining co-tenant or sold and the proceeds divided accordingly.

State legislatures need to prohibit severance of the joint tenancy without a quit-claim document or other assenting notarized signature from all of the remaining joint tenants. That way, all joint tenants’ interests will be protected at all times. The proposed statute should read something like this:

A. Security of joint tenancy estate: No conveyance, devise or encumbrance by a joint tenant of a property held in joint tenancy will be recognizable or enforceable absent a quit-claim document, which must to be signed and notarized by ALL other joint tenants. Any attempt to circumvent this statute or to defraud any joint tenant’s interest by any joint tenant, any mortgage lender or loan officer, any attorney or paralegal, title company or title officer, any realtor or real estate brokerage firm, or any employee thereof, shall be classified as a misdemeanor in Arizona.

B. Punitive damages remedy for violation of the joint tenancy: Any joint tenant so victimized by said act or acts as set forth in (A) above may maintain a separate civil action for damages, provided that such action is brought within one year of the date of reasonable discovery of the severance, to claim any and all damages heretofore available at common law to suits of this nature.

They shall be additionally entitled to punitive damages, to be measured as the minimum of ten percent of the fair market value of the property from all actors jointly and severally, or $50,000, whichever is greater. Any statutory prohibition on joint and several liability is hereby waived for the purposes of this statute.

What is the bottom line? Check your title ownership and act accordingly. The best way to rectify this problem until the legislature gets around to fixing this (which may be never) is to set up a trust (thanks to Judge Mike Yarnell for this nugget of wisdom!), so that the other joint tenants cannot do any of these things to cause destruction of the joint tenancy.  Caveat Emptor!

Contributed by Donald M. Burns
Phoenix School of Law, 3rd year Student
President, Justice for All
602.999.7601 - dakra@cox.net