The notes below are intended only to supplement a complete and diligent review of the related chapter in your course text. Studying these notes alone is not expected to be adequate test preparation.

 

 

TYPES OF OWNERSHIP

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Real property can be owned by a single individual or may be co-owned by two more persons at the same time. When real estate is acquired, the form of ownership chosen will impact on the rights of the parties involved. The type of ownership can affect the transferability or inheritance of the property as well as taxes and exposure of the property to creditors. It is important to consider  the impact of the type of ownership on the property owner as well as those around him or her who may be affected by the form of ownership chosen.

 

Practicing real estate agents should have a clear understanding of the different ownership possibilities but should recommend that experienced legal and/or tax advice be sought by the buyer in every transaction.

 

Ownership in severalty or tenancy in severalty:

• the word severalty comes from SEVER which means to keep apart, divide, or separate

• ownership is vested in one person only (or one business entity such as a corporation)

• owner does not share the rights or liabilities of property ownership with any other person

• when a severalty owner dies, the property passes to the owners heirs or devisees

 

Tenancy In Common:

The most important attribute to remember is that this type of ownership includes no right of survivorship. The right of survivorship means that the surviving owner succeeds to all rights, title and interest of the deceased owner. A tenancy in common does not include rights of survivorship.

 

• ownership by two or more people with no rights of survivorship

• each owner may have unequal shares of ownership

• each owner has an undivided interest in the whole property; the property cannot be physically divided in proportion to each co-owners share of ownership

  Example: owner A has only a 10% interest but owns 10% of the entire property

• an owner may sell his or her interest without the consent of the other owners; new owner becomes a tenant in common with the other owners

• unless another form of ownership is specifically specified, when property is conveyed to two or more unmarried people a tenancy in common is created by default, however, it is always best to specify the form of ownership desired

• dower and curtesy rights apply to a tenancy in common

 

 

Joint Tenancy:

The most important attribute to remember is that this type of ownership includes the right of survivorship. The right of survivorship means that the surviving owner succeeds to all rights, title and interest of the deceased owner. A joint tenancy includes rights of survivorship.

 

• ownership by two or more people with rights of survivorship

• title is held as if all of the owners collectively form a single fictitious unit; it is this fictitious unit that owns the property

• four unities are required to create the single fictitious unit

   

1. unity of time - all joints tenants must acquire their interest at the same time

2. unity of title - all joint tenants must acquire their interest from the same source (deed, will or otherwise)

3. unity of interest - each owner must have the same fractional share of ownership

4. unity of possession - each owner has an undivided interest in the whole property; the property cannot be physically divided 

Example: owner A has only a 20% interest in a joint tenancy with four other owners; each owns 20% of the entire property

• upon the death of a joint tenant the joint tenancy continues with one less member

• surviving joint tenants absorb the deceased members interest

• last survivor has ownership in severalty

• an owner may sell his or her interest without the consent of the other owners; new owner becomes a tenant in common with the other owners as they cannot be part of the already formed joint tenancy

• the joint tenancy form of ownership must be specifically stated in the deed, otherwise, when property is conveyed to two or more unmarried people a tenancy in common is created by default

• dower and curtesy rights are defeated by a joint tenancy

• corporations cannot be part of a joint tenancy - this is due to the fact that in theory, a corporation never dies

 

 

Tenancy By The Entirety:

• similar to a joint tenancy but reserved for a husband and wife only

• as with a joint tenancy, title is held by a fictitious unit

• with a tenancy by the entirety the fictitious unit is the marital unit

• both spouses have an equal undivided interest in the whole property (it cannot be physically divided)

• includes the right of survivorship

• upon the death of one spouse, title to the entire property vests in the surviving spouse

• neither spouse can sell his/her interest without the consent of the other (this is not true with a joint tenancy)

• if the parties continue to own the property after a divorce, the ownership will convert to a tenancy in common (the tenancy by the entirety exists only as long as the marriage exists)

• when property is conveyed to a husband and wife a tenancy by the entirety is automatically formed by default unless another form of ownership is specified

• it is always best to specify the form of ownership desired

   

  

 

 

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