Types of Real Estate Titles
Real estate ownership, or titles, may take one of several different forms. Primary forms of real estate ownership include:
- Tenancy in common, which involves two or more individuals who jointly hold a real estate title. Tenants in common hold a title, individually, for their respective piece of the property. Each individual can transfer or encumber their title. Ownership can also be Willed to another party.
- Tenants by entirety is a title that conveys ownership to a legally married husband and wife, treating the couple as one individual. If one spouse dies, the title is transferred to the living spouse in entirety.
- Joint tenancy, which involves two or more individuals holding a real estate title jointly, where both individuals have equal rights to the property during their lifetime.2
- Community property, a form of ownership by a married couple with the intention of owning property together during the marriage. Both spouses have the right to sell or transfer half of the property or will it to another individual. Aside from real estate, all property acquired during the marriage is deemed community property.3
- Sole ownership, which is characterized by a legal individual or entity that holds a title. Typically, sole owners are single men and women, married men or women holding property apart from their spouses. Sole ownership can also be held by businesses as long as they have the type of structure that allows for investing in real estate
What Is a Title?
The term title refers to a document that lists the legal owner of a piece of property. Titles can be issued to depict ownership of both personal and real property. Personal property is anything that doesn't include real estate, such as appliances, vehicles, antiques, or artwork.
Real property, on the other hand, includes the physical property of real estate as well as a bundle of ownership and usage rights. Title for real property must be transferred when the asset is sold, and it must be cleared for transfer to take place.
Real estate ownership can take several forms, with each having implications on ownership transfer, financing, collateralization, and taxing. Each type of title method has its advantages and disadvantages, depending on an individual's particular situation and how one wants ownership to pass in the event of such things as death, divorce, or sale.
The most common of these methods of title holding are:
- Joint tenancy
- Tenancy in common
- Tenants by entirety
- Sole ownership
- Community property
Let's take a look at what these types of titles mean as well as the advantages and disadvantages of each.
Joint tenancy occurs when two or more people hold title to real estate jointly, with equal rights to enjoy the property during their lives. If one of the partners dies, their rights of ownership pass to the surviving tenant(s) through a legal relationship known as a right of survivorship. Tenants can enter into a joint tenancy at the same time. This usually occurs through a deed.
ADVANTAGES: As mentioned above, the main advantage to entering a joint tenancy is that ownership is passed to the surviving tenant if one passes on, avoiding probate even without a will in place. Another benefit is that neither party in the ownership needs to be married or related. If the parties are not married, they can sell the property without a court petition if all parties agree to the division of property. Furthermore, the responsibility for the property is shared between tenants. That means any financial burden relating to the property belongs to everyone, not just one individual.
DISADVANTAGES: The downside is that any financing or use of the property for financial gain must be approved by all parties and cannot be transferred by will to an external party after one passes, as it automatically goes to the surviving owner.
Another significant disadvantage is that a creditor who has a legal judgment to collect a debt from one of the owners can also petition the court to divide the property and force a sale in order to collect on its judgment. In other words, each of the owners takes a risk in the other's financial choices.
Tenants By Entirety (TBE)
This method can only be used when owners are legally married. Tenants by entirety (TBE) is ownership in real estate under the assumption that the couple is one person for legal purposes. This method conveys ownership to them as one person, with title transferred to the other in entirety if one of them dies.
ADVANTAGES: The advantage of this method is that no legal action needs to take place at the death of one's spouse. There is no need for a will, and probate or other legal action isn't necessary.
DISADVANTAGES: Conveyance of the property must be done together, and the property cannot be subdivided. In the case of divorce, this type of title automatically converts to a tenancy in common, meaning that one owner can transfer ownership of their respective part of the property to whomever they wish.
Sole ownership can be characterized as ownership by an individual or entity legally capable of holding the title. The most common sole ownership is held by single men and women, and married men or women who hold property apart from their spouse, along with businesses that have a corporate structure allowing them to invest in or hold interest in real estate.
When married people wish to own real estate apart from their spouse, title insurance companies typically require the spouse to specifically disclaim or relinquish their right to ownership in the property.
ADVANTAGES: The main advantage of holding the title as a sole owner is the ease with which transactions can be accomplished because no other party needs to be consulted to authorize the transaction.
DISADVANTAGES: The obvious disadvantage is the potential for legal issues regarding the transfer of ownership should the sole owner die or become incapacitated. Unless specific legal documentation, such as a will, exists, the transfer of ownership upon death can become very problematic.
Community Property is a form of ownership by spouses during their marriage that they intend to own together. Under community property, each spouse owns (or owes) everything equally, regardless of who earned or spent the money. Thus, each spouse gets an equal division of real estate property in the event of divorce or death. In the United States, nine states have community property laws: California, Arizona, Nevada, Louisiana, Idaho, New Mexico, Washington, Texas, and Wisconsin. Outside of real estate, personal property acquired during one's marriage, such as vehicles, furniture, and artwork, may be deemed community property.
Depending on the community property state you reside in, real estate acquired during a common-law marriage may also be held as community property. Texas, for example, is a community property state that also recognizes common-law marriages.
ADVANTAGES & DISADVANTAGES: Depending on the State
Property with the Right of Survivorship
Community property with the right of survivorship is a way for married couples to hold title to property, although it is only available in the states of Arizona, California, Nevada, Texas, and Wisconsin. It allows one spouse's interest in community-property assets to pass probate-free to the surviving spouse in the event of death.
Other Ways to Hold Title: Entities other than individuals can hold title to real estate in its entirety:
Ownership in real estate can be done as a corporation, whereby the legal entity is a company owned by shareholders but regarded under the law as having an existence separate from those shareholders.
Real estate can also be owned as a partnership. A partnership is an association of two or more people to carry on business for profit as co-owners. Some partnerships are formed for the express purpose of owning real estate. These partnerships can also be structured as limited partnerships, where investors take limited liability by not making managerial decisions regarding management or transaction decisions. In these cases, one general partner is typically responsible for making all business decisions on behalf of the limited partners.
Real estate also can be owned by a trust. These legal entities own the properties and are managed by a trustee on behalf of the beneficiaries to the trust. There are many advantages and disadvantages to holding real estate that falls outside the scope of this article, but all have to do with benefits surrounding managerial influence and financial and legal liability, in addition to tax and beneficiary considerations.
The Bottom Line - Title to real estate is the method by which ownership is conveyed and transferred during real estate purchases and sales. The methods of owning real estate are determined by state law, so individuals trying to determine the best method to acquire and hold real-property titles should conduct research to determine the unique differences for each method as set out by their state.
For those considering owning real estate through a business entity, such as a corporation, trust, or partnership, it is advisable to consult real estate, legal, and tax professionals to determine which ownership structure is the most beneficial for their particular situation.
In the event of the sole and joint ownership by individuals, prospective owners should consider how their titles should or could be transferred, either by sale or in the event of death, before one method is chosen over another.
Which ever way you consider to hold property always consult with an attorney!
- Tenants With Right of Survivorship (JTWROS) Is a Joint Tenant With Right of Survivorship (JTWROS)?
The term joint tenant with the right of survivorship (JTWROS) refers to a legal ownership structure involving two or more parties for any type of financial account or another asset. Each tenant has an equal right to the account's assets and is afforded survivorship rights if one of the account holder(s) dies. A surviving member inherits the total value of the other member's share of property upon the death of that other member.
A joint tenant with the right of survivorship is a legal ownership structure involving two or more parties for an account or another asset.
- Each tenant has an equal right to the account's assets and is afforded survivorship rights if the other account holder(s) dies.
- A surviving member inherits the total value of the other member's share of property upon the death of that other member.
- A JTWROS can only be established if the owners acquire the property at the same time, have the same title on the asset(s), have an equal share in the property, must have the same right to possess the entirety of the assets.
- This agreement avoids probate but does not allow ownership to be transferred to a deceased individual's heirs
Joint Tenant With Right of Survivorship (JTWROS)
Contrary to what some people may believe, the term joint tenant with the right of survivorship has nothing to do with being a lessee or tenant in a rental apartment. JTWROS is actually a legal concept that applies to individuals who own assets, accounts, or other types of property. It is actually a form of co-tenancy, which is why this arrangement is also often called a joint tenancy.2
Co-tenancy or joint tenancy is a concept in property law that is used to describe the various ways that a piece of property can be owned by two or more people at the same time. A JTWROS is one version of co-tenancy that gives co-owners equal rights to the asset in addition to the right of survivorship. This means that both parties can freely use the asset as they please. But if one tenant dies, their ownership stake passes on to the surviving owner(s).1
A JTWROS is most commonly used between married couples, or between a parent and their child. But it can also be established between parties who are not related. As noted above, this type of legal relationship can involve any number of financial accounts or assets, such as:
- Checking, savings accounts
- Mutual funds
- brokerage fund accounts
This relationship can be broken if one or more of the parties involved sells their interest in the asset to someone else. As such, it becomes a tenancy in common (TIC), which is a less restrictive form of joint ownership.3
All members of a brokerage account are afforded the power to conduct investment transactions within the account.
For Joint Tenants With Right of Survivorship (JTWROS)
The creation of a JTWROS requires that the owners share what is known as four unities:
- The would-be co-owners must acquire the assets in question at the same time.
- The would-be co-owners must have the same title on the assets.
- Regardless of the individual amounts that each owner has given or paid for the assets, each owner must have an equal share of the total assets, given as 1/n percent, where n is the total number of owners.
- The would-be co-owners must each have the same right to possess the entirety of the assets.1
A JTWROS cannot be created if any one of these four unities isn't established. The parties are then treated as tenants in common.
The language must be extremely clear when a JTWROS account is created. For instance, "Mr. X and Mrs. Y are to be designated joint tenants with rights of survivorship, and not as tenants in common." This is necessary because a joint tenancy is automatically assumed to mean tenants in common in certain jurisdictions.
Tenant With Right of Survivorship (JTWROS) vs. Tenancy in Common (TIC)
A joint tenant with right of survivorship differs from a tenancy in common. While each party in a JTWROS has a right of survivorship over the asset, those in a TIC do not have the same legal right. Unless otherwise indicated, this means when a tenant dies, their ownership stake is passed on to an heir or other beneficiary of their choosing.3
While parties in a JTWROS must have an equal stake in the asset or property, tenants in common aren't bound by this rule. Instead, this agreement allows parties to have different stakes in the property. For instance, three people may own a home together. If one individual has a 75% claim in the house, the other two are only able to have a 25% stake in the property.3
Unlike a JTWROS, there are several ways for parties to terminate a TIC. They include:
- Buying out the other party(s)
- Selling the asset
- One or more heirs selling their stake3
Creditors with claims against a deceased account owner's assets, including a joint tenant with right of survivorship, may be settled using any of their previously owned assets.
Advantages and Disadvantages of Joint Tenant With Right of Survivorship (JTWROS)
There are a number of benefits to entering into a JTWROS. Despite these advantages, this type of arrangement does come with certain drawbacks. We've listed some of the most common advantages and disadvantages of being a joint tenant with right of survivorship below.
Entering into a JTWROS avoids probate, which is the legal process where a person's will is proven in court and accepted to be a valid legal document. The deceased owner's heirs cannot inherit their property once a JTWROS is established. This means that the last living owner of the property owns all of the assets. They then become part of this individual's estate.1
Survivorship also provides the remaining party(s) with other benefits in addition to avoiding probate. Surviving parties are allowed to continue using the asset without any interference from outside parties, including a deceased party's heirs.4
Each party in a JTWROS must contribute to the property equally, in addition to holding an equal share and equal access to it. This means they must put in an equal share of any bills, such as property taxes, maintenance, or repairs. This takes the burden off one individual and spreads it out between everyone in the relationship.41
The most obvious disadvantage is that individuals can't pass or will their ownership stake to their heirs. Those who want to own property but don't want to give survivorship to the other owner(s) shouldn't consider this kind of agreement.1
Everyone should ensure they have a stable and solid relationship before they enter into an agreement like a JTWROS. If relations between parties go south, it can impact the agreement.4
Individuals should be sure they can afford the asset before they enter into a JTWROS. Financial strains can put a damper on the agreement, especially when one individual is doing their part. For instance, if one individual can't keep up with their financial obligations to repair a home or make payments on a mortgage, it could have a negative effect on the other party.1
- Avoids probate
- Allows survivors to use assets without outside interference
- Gives each party equal financial responsibility in addition to an equal stake
- Parties can’t Will their ownership stake to heirs
- Relationships can be strained
- One party can be negatively impacted if the other doesn't live up to their responsibility
Tenants With Right of Survivorship (JTWROS) FAQs
Is the Difference Between Joint Tenancy With Right of Survivorship and Joint Tenancy?
The primary difference between a joint tenancy with the right of survivorship and a joint tenancy is that the former passes ownership to any surviving parties rather than to their heirs or other beneficiaries. It also avoids probate and gives each party equal access and an equal stake along with equal responsibility for the property.
What Are the Dangers of Joint Tenancy?
Joint tenancy may lead to problems between parties if or when the personal relationship turns sour. It can also negatively impact one party if the other doesn't live up to their financial obligations. And it prevents owners from passing on their stake to someone of their choosing.
Can a Joint Tenancy With Right of Survivorship Sell Their Share?
A joint tenant can sell their share of the asset to someone else. Doing so nullifies the agreement, turning it into a tenancy in common.
Does Right of Survivorship Override a Will?
The right of survivorship does override any wills that are in place. That's because this kind of arrangement avoids probate. But if the last surviving party in a JTWROS dies, the agreement no longer applies, which means the asset or property is included in their will and goes to their heirs.
The Bottom Line
Owning property on your own can put a strain on your finances. But you can lessen the burden by entering into a special agreement with someone else. This agreement is called a joint tenant with the right of survivorship. Not only does it give you and your partner an equal share in the asset, but you also share equal responsibility.
Keep in mind, though, that your share goes to the surviving tenant if you die, which means you can't leave your share to any of your heirs. You may be better off becoming a tenant in common if you want to pass on your stake to someone else. Regardless of what route you take, be sure to consult a financial and/or legal professional to guide you.
Tenancy in Common (TIC)
What Is Tenancy in Common (TIC)?
Tenancy in common (TIC) is an arrangement in which two or more people share ownership rights in a property or parcel of land. Each independent owner may control an equal or different percentage of the total property, which can be commercial or residential. When a tenant in common dies, their share of the property passes to their estate; they have the right to leave it to any beneficiary they choose.
- Tenancy in common is an arrangement in which two or more people have ownership interests in a property.
- Tenants in common can own different percentages of the property.
- Tenants in common can bequeath their share of the property to anyone upon their death.
- Tenancy in common significantly differs from a joint tenancy, particularly in terms of survivorship rights and the degree of ownership each tenant has
How Tenancy in Common (TIC) Works
When two or more people own property as tenants in common (TIC), they all have equitable interests and privileges in all areas of that property. However, the co-tenants can have a different share of ownership interests.1 For example, Sarah and Debbie may each own 25% of a property, while Leticia owns 50%.
Tenancy in common agreements can be created at any time. So, an individual may develop an interest in a property years after the other members have entered into a tenancy-in-common arrangement.1 Returning to the example above, we could say that Sarah and Leticia originally each owned 50% of the property. At some point, Sarah decided to bring Debbie into the arrangement, splitting her 50% portion with her. That created a group of TICs with a 25/25/50 split.
The members of the agreement can also independently sell or borrow against their portion of ownership.
While the percentage the property owned varies, a tenant in common cannot claim ownership to any specific part of the property.
Disposing of a Tenancy in Common
One or more co-tenants can buy out other members to dissolve the tenancy in common. If the co-tenants develop opposing interests or directions for the property's use or improvement, or they want to sell the property, they must come to a joint agreement to move forward. In cases where an understanding cannot be reached, a partition action may take place. The partition action can be voluntary or court-ordered, depending on how well the co-tenants work together.2
In a legal partition proceeding, a court will divide the property among the tenancy in common members, allowing each member to move forward separately from other members. Known as a partition in kind, it is the most direct way to divide the property and is usually the method used when co-tenants are not adversarial.2
If the co-tenants refuse to work together, they may consider entering into a partition of the property by sale. In this case, the holding is sold and the proceeds are divided among the co-tenants according to their respective interests in the property.2
Property Taxes With Tenancy in Common (TIC)
Because a tenancy in common agreement does not legally divide a parcel of land or property, most tax jurisdictions will not separately assign each owner a proportional property tax bill based on their ownership percentage. Most often, the tenants in common receive a single property taxbill.3
In many jurisdictions, a tenancy in common agreement imposes joint-and-several liability on the co-tenants. This stipulation means each of the independent owners may be liable for the property tax up to the full amount of the assessment. The liability applies to each owner regardless of the level or percentage of ownership.4
Once the property tax is paid, co-tenants can deduct that payment from their income tax filings. If the taxing jurisdiction followed joint-and-several liability, each co-tenant can deduct the amount they contributed. In counties that do not follow this procedure, they can deduct a percentage of the total tax up to their level of ownership.5
Tenancy in Common vs. Joint Tenancy
Although they sound similar, tenancy in common differs in several ways from a joint tenancy.
In a joint tenancy, tenants obtain equal shares of a property with the same deed at the same time, and additions or removals of any member of the group are much more significant. In TIC agreements, the change in members does not break the agreement; with a joint tenancy, the agreement is broken if any of the members wish to sell their interest.6
For example, if one or more co-tenants want to buy out the others, the property technically has to be sold and the proceeds distributed equally among owners. Joint tenancy members can also use the legal partition action to separate the property, if the holding is large enough to accommodate this separation.
Death of a Joint Tenant
Another substantial difference occurs in the event of one co-tenant's death. As mentioned earlier, TIC agreements allow the passing of property as a portion of the owner's estate. However, in a joint tenancy agreement, the title of the property passes to the surviving owner.
In other words, tenants in common have no automatic rights of survivorship. Unless the deceased member's last will specifies that their interest in the property is to be divided among the surviving owners, a deceased tenant in common’s interest belongs to their estate. Conversely, with joint tenants, the deceased owner’s interest is automatically transferred to the surviving owners. For example, when four joint tenants own a home and one tenant dies, each of the three survivors ends up with an additional one-third share of the property.
Marriage and Property Ownership
Some states set joint tenancy as the default property ownership for married couples, while others use the tenancy in common ownership model. A third model, used in some 25 states and the District of Columbia, is a tenancy by the entirety, in which each spouse has an equal and undivided interest in the property.
Contract terms for tenants in common are detailed in the deed, title, or other legally binding property ownership documents.
Pros and Cons of a Tenancy in Common (TIC)
Buying a home with a family member, friend or business partner as tenants in common may make it easier to enter the real estate market. Because deposits and payments are divided, purchasing and maintaining the property may be less expensive than it would be for an individual. Additionally, borrowing capacity may be streamlined if one owner has a greater income or better financial footing than the other members.
However, when mortgaging property as tenants in common, typically all borrowers sign the documents. Since all members sign mortgage documents, in the case of a default, the lender may seize the holdings from all group members. Also, even if one or more borrowers cease giving contributions to the mortgage payment, the other borrowers must still cover the payments to avoid foreclosure.
The ability to use a will for designating beneficiaries to the property gives the co-tenant control over their share. If a co-tenant dies without a will, their interest in the property will go through probate—a costly event both in terms of time and money.
Also, the remaining co-tenants may find they now own the property with someone they do not know or with whom they do not agree. This new co-tenant may file a partition action, forcing unwilling co-tenants to sell or divide the property.
- Facilitates property purchases
- Number of tenants can change
- Different degrees of ownership possible
- No automatic survivorship rights
- All tenants equally liable for debt and taxes
- One tenant can force sale of property