Common Ways to Hold the Title of Real Property

SOURCE: Realty Times

Whether it’s your primary home, an investment rental property, commercial property,  or a second home, a title determines your ownership when you own real estate. There are different types of titles for real property, and you should be able to make a general differentiation to ensure you’re choosing the option best suited to your needs.

Real estate is land as well as the structure on it. Properties can be commercial or residential.

The title is the document listing the legal owner of a piece of property, and it’s a way to show ownership of personal and real property.

Real property is the physical real estate property and usage and ownership rights. The title for real property has to be transferred if you sell the asset, and it has to be cleared for the transfer to occur.

Every title method has pros and cons, and which is best for you depends on your situation. We cover some of the more common types of title below.

Joint Tenancy

A joint tenancy title is when two or more individuals jointly hold the title to a piece of real estate. With joint tenancy, you have equal rights to enjoying the property during your lives. If one of the people dies, then their ownership rights pass on to the surviving tenants, in a legal situation called the right of survivorship.

The benefit is that the ownership passes to a surviving tenant if one passes on, so you can avoid probate even if there’s no will.

Another benefit is that you don’t have to be married or related in the ownership relationship. If the parties aren’t married, they can sell the property without a court petition as long as everyone agrees to the division.

The financial burden is shared among the tenants.

The downside is that financing or use of the property for financial gain has to be approved by everyone.

If there’s a legal judgment from a creditor, they could also petition the court for a division of the property, forcing a sale.

Tenancy in Common

Tenancy in common or TIC is a title situation where two or more people hold real estate jointly. They could have either equal or unequal ownership percentages. All the aspects of the property are shared by the people who are listed on the title. Each owner has a right to use and occupy the entire property.

Tenants in common hold the title individually for their portion, and they can get rid of it at will.

The advantage is that one owner can use the property as collateral. One owner’s creditors can put liens only against the owner’s portion of the property.

The downside is that it doesn’t provide automatic survivor rights. All tenants share the liability, and each owner can be responsible for up to the full amount due on something like property taxes. If one owner can’t pay something, the other owner is liable.

Tenant by Entirety

In tenants by entirety situations, the owners have to be legally married. This type of ownership assumes that a couple is a single person in the eyes of the law. They have ownership as one person, and the title is transferred to the other in entirety if one passes away.

The benefit here is that you don’t have to take legal action if your spouse dies. The disadvantage is that you can’t subdivide the property. If a couple holds a property this way and they’re divorced, the title automatically converts to tenancy in common.

Community Property

Spouses share this form of ownership during their marriage. Under community property, each spouse owns but can also owe everything equally, no matter who’s earning or spending the money. If there’s a divorce, each spouse gets an equal share of the real estate. There are nine states that have community property laws.

There’s also community property with the right of survivorship, meant as a way to allow married couples to hold title to properties. This lets the interest of one spouse pass to the surviving spouse without going through probate if they die.

There are other ways to hold a title, such as trust ownership, where the properties are managed and owned by a trustee on behalf of beneficiaries of the trust, but the options detailed above are the most common.

SOURCE: Realty Times