When it comes to real estate, there are many forms of ownership that impact both the rights and responsibilities of property owners. These forms can vary depending on the specific type of property in question, as well as any local or state laws that apply. Some of the more common forms of ownership in real estate include sole ownership, joint tenancy, tenancy in common, and more. In this article, we will cover all of the common types and the benefits and use cases of each!
Sole Ownership
The first and most common form of ownership is sole ownership, and the name speaks for itself, in simple terms it is; ownership by a single individual which can also be referred to as ownership in severity.
This form of ownership allows an individual to hold property in their name and solely their name. If any other parties are to be involved in the ownership of the property acquired under this means, it would then shift to one of the forms of ownership below.
Joint Tenancy
Joint tenancy relates to a land estate owned by two people or more. It is set apart by its right of survivorship clauses. In a joint tenancy agreement, if two people own property as joint tenants, either owner becomes the property’s sole owner whenever the other passes away. For a joint tenancy to be established, four items must be in place.
- The first is the unity of time. It insists that the interests of every joint owner start at the same time.
- The second is the unity of title. This means that every joint tenant must acquire a title conveyed in the same way
- Thirdly, there is the unity of interest. Here, there is a need for each owner to have the exact same interest in the property. One owner, for example, may not hold a life estate, and the other a smaller portion.
- Finally, there is the consideration of the unity of possession. This means that every party involved in ownership must own an equal right to the property’s possession.
A more complex form of joint ownership in buying real estate is group or co-ownership. The reasons some may decide to do this is mostly to finance the purchase of a property with more ease. In these cases, when owning real estate jointly with others, the most popular organization is a limited partnership. A limited partnership shields the investor from any personal liability. At the same time, it allows investors to take deductions that offset the partnership’s incomes
Ownership in Severalty
ownership in severalty occurs when the ownership of a thing is vested in one person to the exclusion of all others. The owner has the sole and absolute right to use, possess, and dispose of the property as he or she sees fit.
The term ownership in severalty is often used in reference to real property, such as land or a building. However, it can also apply to personal property, such as a car or piece of jewelry. When ownership in severalty is established, the owner has full power to sell, lease, or otherwise transfer ownership rights to another person.
Tenancy By The Entirety
Nearly half the states allow married couples to own property as tenants by the entirety. Similar to joint tenancy, this form of ownership is restricted to married and lawfully partnered individuals. Another reference for it is “the unity of person”. In a large number of the states that allow tenancy by the entirety, joint ownership of the property by both spouses automatically takes effect upon the acquisition of the asset.
The distinct importance people glean from tenancy by the entirety is this: neither spouse can terminate the agreement alone. Only a joint decision to terminate can end the agreement. Neither spouse alone can sell or choose to lease interest in such property. They would require the consent of the other spouse. In some states, a creditor of just one spouse cannot seize a separate interest in the property. This is because the interest may be indivisible.
Tenancy In Common
There are slight differences between joint tenancy and tenancy in common. In cases where two or more parties enter into a tenancy in common ownership, the percentages of ownership will differ between all of those involved. For example, Tracy may own 35% of the property, whereas Nikolai may own the other 65%. Unlike in joint tenancy, each party holds their own indivudial title respective to the percentage of ownership, and they may sell this ownership as desired.
Community Property
Community property is a type of joint ownership that is common in many parts of the United States. Under community property laws, spouses have shared ownership over all property that they acquire during their marriage, including real estate, personal property, and other physical assets. This ensures that each spouse is entitled to an equal division of these assets in the event of divorce or death.
States in which community property laws are in effect include; California, Arizona, Nevada, Louisiana, Idaho, New Mexico, Washington, Texas, and Wisconsin. Outside of community property states, couples may also choose to hold certain assets jointly or enter into other types of official agreements concerning their financial status. Regardless of how community property ownership takes form in a particular marriage or relationship, it remains a vital tool for ensuring security and stability.
In COnclusion
Now you’ve seen the most common forms of ownership and their pros, cons, and use cases. While there are many other ways in which people, couples, and organizations can acquire and hold property, in your day-to-day life you will likely come across these the most. Take note as these will appear within your real estate exam as questions!
