Real Estate Ownership Forms

Ownership in Severalty

• Occurs when property is owned by one person, individual, company, or corporation.
• The sole owner has the right to sell, lease, will, or transfer ownership rights without needing permission.

Co-Ownership

• Title to a parcel of real estate is held by two or more persons.
• Individuals may co-own property as:
  • Tenants in common
  • Joint tenants
  • Special forms for married couples or civil unions (recognized in some states)
• Differences between types of co-ownership become apparent when the property is conveyed or upon the death of an owner.

Tenancy in Common

• Two or more people own a partial real estate as tenants in common.
• Each tenant holds an undivided interest in the property.
• Co-owners have unity of possession: each is entitled to possession and use of the entire property, despite holding only a fractional ownership interest.
• If no fractions are stated, tenants are presumed to hold equal shares.
  • Example: Five people hold title; each owns an undivided 1/5 interest.
• A co-owner can sell, convey, mortgage, or transfer their individual interest without the consent of other co-owners.
• A share owned by a married couple can only be transferred with the agreement of both parties.
• No individual tenant may transfer ownership of the entire property.
• When a co-owner dies, their undivided interest passes according to their will, to heirs identified by the state (if no will), or to a living trust.
• When two or more single individuals or couples acquire title to real estate, and the form of ownership is not indicated, the new owners are usually determined to have acquired title as tenants in common.
• This tenancy in common has become popular in expensive urban areas because it allows a multifamily dwelling to be sold to multiple owners without converting into a condominium.
• Formation of a tenancy in common requires the use of an attorney to clarify the terms of the ownership.
• Example: A and B are tenants in common, each with a 1/2 interest. If B dies, A does not acquire B's property; it goes to B's heirs (C and D).

Joint Tenancy

• Another form of co-ownership recognized in most states for two or more people (married or not).

• Distinguishing feature: the right of survivorship. Upon the death of a joint tenant, the deceased's interest transfers directly to the surviving joint tenants.

  • Essentially, there is one less owner.
  • No formal legal action is required; only a death certificate is needed.

• If there are only two joint tenants, the death of one terminates the joint tenancy.

• If there are three or more joint tenants, at each successive death, the surviving owners acquire the deceased’s interest, and the last survivor takes title in severalty.

• Creating a joint tenancy:

  • Can only be created by intentional act (conveying a deed or giving property by will or living trust).
  • The instrument must specifically state the intention to create a joint tenancy, and parties must be explicitly identified as joint tenants.
  • Four unities are needed (PITT):
    • Possession: All joint tenants hold an undivided right to possession.
    • Interest: All joint tenants hold an equal ownership interest.
    • Time: All joint tenants acquire their interest at the same time.
    • Title: All joint tenants acquire their interest by the same document.
  • The four requirements or unities are met when the right of possession of a property is acquired by all the joint tenants by means of a single instrument that conveys an equal undivided interest to all of them, stipulating that there to be joint tenants with the right of survivorship.
  • In some states, identifying the owners as joint tenants automatically includes the right of survivorship.

• Terminating a joint tenancy:

  • A joint tenancy is destroyed when any one of the four unities of joint tenancy is terminated.
  • Joint tenants can convey their individual interest, which destroys the unity of time and title as to that interest.
    • The new owner cannot be a joint tenant but is instead a tenant in common.
    • If there were only two joint tenants, the joint tenancy is terminated.
    • If more than two owners, there will still be a joint tenancy, but only as to the interest held by the remaining joint tenants; the new owner is a tenant in common.

• Example: A, B, and C are joint tenants. A sells their 1/3 interest to D. D is now a tenant in common with B and C, but B and C are still joint tenants. If C dies, B would own 2/3, and D would own 1/3.

• The difference between joint tenancy and tenancy in common is a rise of survivorship.

Termination of Co-Ownership by Partition Suit

• Partition is a legal way to dissolve the relationship between co-owners when they do not voluntarily agree to its termination.
• If the court determines that the property cannot be divided physically without destroying its value, the court will order the real estate sold.
• Proceeds of sale are divided among co-owners according to their fractional interest.
• Joint tenancy and tenancy in common, they can force a sale.
• Partition can only happen through co-ownership. It is for tenancy in common and joint tenancy.
  Developers: Snooping to buy land. Buy one of the portions from owners. If one developer buys that interest, developer can force a sale.

Married People

• Most states recognize special forms of co-ownership available only to married couples.

Tenancy by the Entirety

• Recognized in half of the states.
• A special form of co-ownership used in some states that allows a spouse to inherit the other spouse ownership interest upon death.
• Each spouse has an equal undivided interest in the property.
• The term entirety refers to the fact that the owners are considered one indivisible unit, one undivided person because common law view the married couple as one legal person.
• Spouses have the right of survivorship.
• During their life, they can convey title only by deeds signed by both parties.
• One party cannot convey a one-half interest.
• They generally have no right to partition or divide the property.

Community Property Rights

• Based on the idea that spouses are equal partners in the marriage rather than merging into one entity.
• Each owns 50/50.
• Any property acquired during the marriage is considered to be obtained by mutual effort.
• Only nine states recognize community property:
  • Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington (state), and Wisconsin.
  • Alaska allows married couples the option of choosing this form of ownership.
  • All of them recognize two kinds of property, separate property and community property.
• Separate property:
  • Any real or personal property owned solely by either spouse before the marriage.
  • Acquired by gift or inherited by one spouse during the marriage.
  • Purchased with separate funds during the marriage.
  • Income earned from a spouse's separate property remains separate.
  • Separate property can be mortgaged or conveyed by the owning spouse without the signature of the non-owning spouse.
• Community property:
  • Any real and personal property acquired by either spouse during the marriage.
  • Conveyance or encumbrance requires the signature of both spouses.
  • Spouses can will half of the community property to whomever they desire.
  • Upon the death of one spouse, the other spouse owns one-half automatically.
    • If a spouse dies without a will, half of the community property already belongs to the surviving spouse; the other half is inherited depending on state law.
  • Community property does not provide the automatic right of survivorship that Tennessee body and tiny does.
  • A spouse who wishes to maintain the character of separate property must be careful not to commit some funds that are separate with funds that belong to the community.

Cheat sheet of form of ownership review:

• Tenancy in common:
  • Each tenant holds a fractional undivided interest with unity possession only.
  • Tenants can convey or will the individual interest, but not the entire property.
• Joint tenancy:
  • They have unity of ownership.
  • It's created intentionally, and it has the unities of possession, interest, time, and title.
  • They all receive the same time same document.
  • If conveyed, they have the right survivorship, and it cannot be conveyed to the heirs.
• That is by the entirety:
  • Spouses, each have an equal undivided interest in the property.
  • They also have rights of survivorship, and they can only convey it by deed signed by both of them, and one party can't convey a one half interest.
• Community properties:
  • Spouses are equal partners in the marriage.
  • Real or personal property acquired during a marriage is community property.
  • Conveyance requires a signature of both spouses.
  • They don't have the right survivorship. So when one spouse dies, the one who's left only owns one half (distributes by will to heirs).

Maryland Real Estate (Midterm June 6)

• Concurrent owners means the same thing as co ownership.
• Unless the d clearly specifies otherwise, a conveyance of Maryland real estate to two or more persons normally creates a tenancy in common.
• To create a joint tenancy, it's necessary to use words such as the Fred Donaldson and Sam Roberts as joint tenants and not as tenants in common, and they're also gonna add the phrase with right of survivorship.
• Here in contrast, a deed to a married couple is presumed to create a Tennessee body entirety unless it specifies otherwise.
• Both spouses must sign the deed to convey the property that they hold as tenants by the entirety. Therefore, neither spouse who owns Maryland's real property as tenant by the entirety may petition the court for his partition against the will of the other tenant.
• Tenants by the entirety may join in granting the property back to themselves as either tenants in common or joint tenants or either granting their entire property to one spouse or the other, and they can do this without having their ownership passed through an attorney.
• Property held as tenancy by the entirety: In the case of federal tax lien is not subject to a forced partition to satisfy the death of one tenant.
• Upon divorce or other legal termination of the marriage, tenants by the entirety become tenants in common by operation of law. When divorce occurs, causing the formal couple's ownership to change the tenancy in common by action of law, the court may still delay any partition proceedings that's dividing of the property by one against the other's will for a period as long as three years.