Forms of Co-Ownership
What are the common forms of co-ownership available to real estate owners?
There are several forms of co-ownership available to those that purchase and own real estate. Of course, co-ownership is when two or more individuals own real estate. What we are talking about here is how title to real estate can be held. The form of co-ownership that is selected is significant as it will determine who must sign legal documents to transfer ownership of the real estate.
The forms of co-ownership we will cover in this exam prep article are joint tenancy, tenants in common and community property.
What is Joint Tenancy?
Joint tenancy is a unique form of real estate co-ownership. It is ownership by two or more people in which there is a right of survivorship. Right of survivorship means that when a co-owner dies, their ownership share is distributed to the remaining owners. This concept could be a question on your real estate licensing exam. Remember, right of survivorship does NOT mean that the deceased owner’s share passes to their heirs. It moves to the remaining joint tenants.
To select this form of co-ownership, joint tenancy must be specified on the deed. If the kind of co-ownership is not determined on the deed courts will usually assume ownership by tenancy in common rather than joint tenancy.
New joint tenants may NOT be added after the fact. Although a joint tenant may sell or convey their interest to another, the new owner would be considered a joint tenant with the original tenants in common since they would have no unity of title.
Are there any legal requirements necessary to form ownership of joint tenancy?
Yes, and the real estate exam loves to ask about them. To legally be considered joint tenancy, there are four unities of ownership which are required. They can be remembered with the acronym “TTIP.” They are unity of:
- Time – All owners must acquire ownership at the same time.
- Title – The same document must create the ownership of all tenants.
- Interest – Ownership between the parties is equal, and they all have the same type of ownership estate.
- Possession – All owners have equal rights to possess and access the property.
What are tenants in common?
Tenants in common is a form of co-ownership where each tenant holds an undivided interest in a property. Their percentage of ownership can be equal, but they can also be unequal. The percentage of ownership of the property of each owner must be stated on the deed. Even though ownership between the owners may be uneven, they all have an equal right to occupy the property, which is called unity of possession.
Under tenants in common, there are no rights of survivorship. This would mean that when a tenant dies, their ownership interest goes to their heirs. Tenants in common may mortgage or sell their interest in the property without the consent of the other tenants.
What is community property?
Community property is a type of ownership that is not recognized in all states. In states in which it is accepted, it is property that is acquired by a husband and wife during their marriage.
Can you own property as an individual or business entity?
Yes, you sure can. This type of ownership is legally known as severalty. Seems strange they would use a word to describe this type of ownership that has several in it though. Think of it this way. The root of the word is “sever,” which means to cut off. If you own property by yourself, you are cutting off all other interest in the properties. Ownership by a legal entity, such as a corporation, would be considered ownership in severalty as well. Severalty is also known as sole ownership or tenancy in severalty, but on your exam, they will use the term severalty.
What else can help me prepare to pass my real estate licensing exam on my first attempt?
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