Co-ownership is where there are multiple individuals with an ownership interest in property. Many people chose to own real estate in some form of "concurrent" or co-ownership. There are three main ways to own real property jointly:
Your legal rights and obligations will depend on the type of co-ownership agreement you have. The default rule for co-ownership is tenancy in common. For example, if there is an unmarried couple living together in a home, courts often presume that property is co-owned as a tenancy in common.
What happens to the ownership interest of a co-owner will depend on the type of co-ownership that was established.
Joint Tenants: If you own property as joint tenants, then your ownership rights include the right of survivorship. This means that when one joint tenant dies, their interest in the property automatically goes to the other joint tenant.
Tenancy in Common: Unlike joint tenancy, tenancy in common does not include the right of survivorship. This means that when one co-tenant dies, their interest in the house does not automatically go to another co-tenant. The downside is that in case of co-tenant’s death, probate will probably not be avoided, meaning the rights of the surviving estate of that co-owner will be determined by a will or inheritance scheme of that state. The upside is that who retains control over the ownership interest of the property may better reflect intentions of the decedent co-tenant.
Tenancy by the Entirety: Similarly, a tenancy by the entirety has a right of survivorship. A simple definition of tenancy by the entirety is a marital property interest between validly married partners. In that tenancy by the entirety is basically joint tenancy but held by legally married spouses. In states that recognize such form of co-ownership, there is a presumption that conveyance to married spouses will automatically create tenancy by the entirety, unless it is otherwise stated. The benefits here are:
- Avoiding delays
- Avoiding complications and costs of probate
- The right of survivorship may achieve same outcomes as will
Co-owners and spouses under a tenancy by the entirety should be aware that even where there is a will with contrary provisions, right of survivorship might prevent the enforceability of those provisions in the will.
If there is no right of survivorship, a co-owner is usually free to transfer his property interest. Essentially, when a co-owner sells his own interest, the buyer becomes a new co-owner, and tenancy in common continues. This means that unlike a joint tenancy, a tenancy in common is freely transferable. Such transfer may happen in several different ways, including:
- Sale of ownership interest in the property
- Passing property by will, deed, some other conveyance
However, keep in mind that a co-owner cannot transfer the ownership rights of other co-owners without permission. Additionally, if there is a right to survivorship, one co-owner or spouse cannot unilaterally convey or encumber the property without permission or consent of the others involved in the co-ownership.
Tenancy in common has several distinct characteristics that should be considered. For example, under a tenancy in common:
- Each co-owner has right to use and possess the entire property
- Each co-tenant owns a certain share of property as their own
- Co-owners may hold unequal ownership shares
- Maintenance and other costs are shared in proportion to ownership shares
Those interested joint tenancy and tenancy by the entirety should be aware of the so-called "four unities":
- Time – the spouses interests must vest at the same time
- Title – tenancy by the entirety must be created by the same instrument
- Interest – spouses must take interest of the same kind, share, and duration
- Possession – spouses have equal right to possess and enjoy entire property
It is also worth point out that a tenancy by the entirety can be terminated in several different ways. While there is no way for one co-owner to do so on their own, here are a few ways a tenancy by the entirety can be terminated:
- Death of co-owner spouse
- Divorce or dissolution
- Mutual agreement of co-owner spouses
- Joint creditor attempting collection
- Conveyance, if both spouses join in and consent
Finally, with regard to tenancy by the entirety, co-ownership is only available to legally married spouses, not just cohabiting couples. Not all states recognized tenancy by the entirety, and in those states that do there may or may not be recognition for married same-sex couples.
This article has only scraped the surface of the complexity involved in and the potential consequences of joint ownership. Furthermore, each type of joint ownership has its own limitations that will vary from state to state. Therefore, an real estate lawyer will be the best source of advice for your specific situation. A qualified lawyer may address such issues as formation, termination, co-tenants’ obligations towards each other, as well as disputes among them.