Types of Property Ownership
There are a few different ways to describe how a property is owned, let’s discuss those. Property owned in severalty is a dwelling that is owned by only one person. This person has full control over the land and may use it as they see fit. Tenancy in common means there are two or more parties who own the property who have an equal share despite the amount of money they put down. Joint Tenancy happens when there are two or more parties who have equal shares and undivided interest; similar to a tenancy in common but it is more fitting for those who are related, married couples for instance. These are the three topics that are going to be highlighted below.
Ownership in Severalty
This term is used to describe a single owner who has full legal control over their property. This means that they can conduct use within their property as they see fit given that all behavior is legal. They may also put the property on the market, lease it out, or give it away as a gift. The sole owner can be an individual or even a company or organization. A single owner can be a unit of people acting as one.
Tenancy in Common
A tenancy in common happens when a property has two or more owners. For instance, if two or more parties inherit the same property, it would be a tenancy in common. All parties involved have an equal share and therefore equal control over the property even if one owner put forth more money into the deal. If two people purchase a property together this way, and one person contributes $250,000 and another contributes $100,000, they will each have equal ownership unless they both decide otherwise in the terms of their agreement. This is known as undivided ownership. What if one of them wanted to sell? If one of the owners wished to sell, they could sell their share to a third party of their own free will. They do not need the consent of the other owner. The sale, even if the outcome is not ideal, will not hurt the other owner(s). Any party may include their portion of the property in their will to a person they wish to take control of it when they pass away, however, this person will not immediately take on the interest. This is known as no right of survivorship.
A joint tenancy is made up of two or more parties. Each of them has equal ownership and undivided interest, the same as in a tenancy in common. When a property is purchased via joint tenancy, each owner has the right of survivorship over each other’s interests despite the terms laid out in their respective wills. This means that even if a party leaves their share to a friend or loved one, the other party or parties who have an undivided interest would take on the interest of the deceased. In a joint tenancy, if one person wishes to sell, the new buyer would then become a “tenant in common.” In a situation where one party wants to terminate the joint tenancy, and could not get the other party to approve, the one who wishes to sever ties would have to file a suit to partition. This is essentially the act of requesting that the court place a value on the property and ultimately force the process of the sale to happen.
Everyone has a different situation when it comes to property ownership. Some owners or corporations possess property as the sole owner (severalty), which means they have the final say in what happens with it. Other owners will opt for a joint tenancy, particularly married couples. This setup is beneficial for them due to the fact that there will be no lengthy probate after either spouse passes away. Probate is the legal process that goes on to determine that property and other belongings are in the correct hands when their owner passes. Tenancy in common is good for those purchasing a property with someone who is not related to them in some way; an investment partner for instance. Each ownership type has a situation where it fits best, however it is good to be knowledgeable about all of them when it comes to home buying and investing so that you can choose the best path for you.