RE Chapter 8: Forms of Real Estate Ownership

Ownership in severalty

all by yourself, occurs when property is owned by one individual or corporation, “served” or “cut off” from other owners, sole rights to ownership and sole discretion to sell, will, lease or transfer part or all of the ownership rights to another person or entity

Co-ownership (most common)

when title to one parcel of real estate is held by 2 or more individuals

tenancy in common

a parcel of real estate may be owned by 2 or more tenants in common, each tenant holds an undivided fractional interest in the property

• not divided into a specific half or third

• can sell interest, property goes to heirs

  • ex: 3 of us want to own a building, cost $2 million, each person has fractional interest, person A: 60%, B: 25%, C: 15%

joint tenancy

distinguishing factor is unity of interest→ title is held as though all owners, collectively, constitute one unit

• family, spouse, close relations

right of survivorship

upon the death of a joint tenant, the deceased interest transfers directly to the surviving joint tenant(s), a will has no effect on the transfer of property→ one less owner

• creating joint tendencies- created by the intentional act of conveying a deed or giving the property by will

• someone IS getting the interest

  • if there are 4 people- each has 25%, if leave/die others have to cover your 25%

PITT (required to create joint tenancy)

possession- undivided right to possession of the property

interest- equal ownership in interests in property

time- acquire interest at the same time

title- acquire interest by the same deed/title

tenancy by the entirety

allows spouses to use special form of co-ownership, married couples is viewed as one “legal person”

• equal undivided interest in the property

• only for married couples, principle residence

Marital Property

• IL is NOT a common property state, it is a marital property state

  • property acquired one married except for by gift or will

non-marital property

property owned prior to marriage and property acquired after marriage by gift or will

trust

device by which one person transfers ownership of property to someone else to hold or manage for the benefits of a third party

• keeps ownership confidential and transfer is simple

Real Estate Investment Trusts (REITS)

invest money in stock market, building, owner by investment trust, deduct expenses

trustor

creates the trust, sign deed in trust- beneficial interest

trustee

holds title to the assets, now owns the property

beneficiary

benefits from the trust

partnership

association of two or more persons who carry on a business for profit as co-owners

general partnerships

all partners participate in the operation and manage of the business and share full liability for business losses and obligations

limited partnerships

consists of one or more general partners as well as limited partners, only stands to lose their initial investment

corporations

a legal entity created under the authority of the laws of the state from which it receives its charter

S corporation

alternative form of business ownership that provides the benefit of a corporation as a legal entity but avoids double taxation

syndicate

2 or more people or firms joined together to make and operate a real estate investment

joint venture

form of partnership in which 2 or more people or firms carry out a single business project

limited liability company (LLC)

limited liability offered by a corporate form of ownership and the tax advantages of a partnership

Condo ownership

real property ownership, deed

• the owner of each unit holds a fee simple title to the unit and specified share of the undivided interest in common elements as a tenant in common

Co-op ownership

personal property, proprietary lease- give yourself a lease

• a corporation holds title to the land and building and offers shares of stock to prospective tenants

• IRS treats co-ops as it does fee simple interest in single homes or condos in regards to deductibility of loan interest, property taxes and home seller’s tax exclusions

town home ownership

cross between a single family home and apartments, each unit and lot is vested in the individual owner, owns fractional interest in the common areas t

time-share estate

fee simple interest for a specific period but held at will

• a deed with a calendar attached, you own the property for a week at some point during the year