Unlocking Co-Ownership: Navigating the Different Ways To Own Property With Others

Buying property is a significant investment, and sometimes, it makes sense to do it with others. Whether you’re purchasing a home with your spouse, investing in real estate with business partners, or planning for the future with family, understanding the different ways multiple people can own property together is crucial. The form of ownership you choose will impact your rights, responsibilities, and what happens to the property if one owner passes away or wants to sell.

Common Forms of Co-Ownership

Let’s delve into the most prevalent ways multiple individuals can jointly own property:

1. Tenancy in Common

Ownership Shares: Each owner (tenant in common) holds a separate, undivided interest in the property. These shares can be equal or unequal (e.g., one owner has 25%, another has 75%).

Right of Survivorship: There is no right of survivorship. This means that when a tenant in common dies, their share of the property passes to their heirs or beneficiaries according to their will or state intestacy laws, not to the other tenants in common.

Transferability: A tenant in common can sell, gift, or mortgage their share of the property without the consent of the other owners.

Creation: It’s the default form of co-ownership unless the deed specifically states otherwise.

2. Joint Tenancy with Right of Survivorship

Ownership Shares: All owners (joint tenants) hold an equal, undivided interest in the property.

Right of Survivorship: This is the defining feature. When one joint tenant dies, their share automatically transfers to the surviving joint tenant(s). This continues until only one owner remains, who then owns the entire property.

Four Unities: Joint tenancy requires the presence of four unities:

• Unity of Time: All joint tenants must acquire their interest at the same time.
• Unity of Title: All joint tenants must acquire their interest through the same document (e.g., a deed).
• Unity of Interest: All joint tenants must have equal ownership shares.
• Unity of Possession: All joint tenants must have the right to possess the entire property.

Transferability: A joint tenant can transfer their interest during their lifetime, but doing so severs the joint tenancy. The new owner becomes a tenant in common with the remaining original joint tenant(s).

Creation: The deed must explicitly state that the owners are taking title as “joint tenants with right of survivorship.”

3. Tenancy by the Entirety

Ownership Shares: Similar to joint tenancy, both spouses own the entire property as a single legal entity. Neither spouse owns a separate share.

Right of Survivorship: Like joint tenancy, the surviving spouse automatically inherits the entire property upon the death of the other spouse.

Fifth Unity (Marriage): Tenancy by the entirety requires all four unities of joint tenancy plus the unity of marriage. The owners must be legally married.

Protection from Creditors: A key advantage is protection from individual creditors. Creditors of only one spouse cannot typically attach a lien to or seize the property. Only creditors of both spouses can.

Termination: Tenancy by the entirety can only be terminated by:

• Death of one spouse.
• Divorce (which usually converts it to a tenancy in common).
• Mutual agreement of both spouses.
• Joint creditors of both spouses foreclosing on the property.
• Transferability: Neither spouse can transfer their interest in the property without the consent of the other spouse.

Creation: The deed must explicitly state that the owners are taking title as “tenants by the entirety.”

Availability: Not all states recognize tenancy by the entirety. It’s primarily available to married couples in certain states.

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4. Holding Title Under a Legal Entity

Beyond individual co-ownership, property can also be held by legal entities, offering different advantages and structures:

• Partnership/Limited Liability Company/Corporation Ownership: When real estate is acquired for business purposes, it’s common to hold title in the name of a partnership, limited liability company, or corporation. The business agreement dictates how the property is owned, managed, and how profits or losses are distributed among the partners. The partners’ rights and responsibilities are governed by the business agreement and state laws. This structure can provide liability protection and tax benefits, but it’s crucial to have a well-drafted business agreement.

• Trust Ownership: Another option is to hold property in a trust. A trust is a legal arrangement where a trustee holds title to property for the benefit of one or more beneficiaries. The trustee manages the property according to the terms of the trust agreement. Trusts can be used for various purposes, including estate planning, asset protection, and managing property for minors or individuals with disabilities. The beneficiaries have equitable ownership of the property, while the trustee holds legal title and has a fiduciary duty to act in the best interests of the beneficiaries.

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