If you are buying a house or other real property with another person, you have several options for how you title the property. There are three main types of titles for real property: the joint tenancy, the tenancy in common, and the tenancy by the entirety. Which you choose will have a significant impact on your rights to the property.
Which is right for you? It depends on your circumstances and goals. This article summarizes the positives and negatives of each of the three title options available in all states. It also takes a brief look at community property law, which is a significant issue for married people living in states following community property law.
We used the phrase “concurrent owner” above. In joint tenancy, tenancy in common, and tenancy by the entirety, all owners have the same right to possess, access, and use the property. One owner may not kick another owner off the property (called ouster in law) or alter the rights of other owners without suffering consequences.
One caveat: The definitions and discussion here is based on English common law, which has its roots going back 500 years. Many state legislatures changed the details of common law when writing their concurrent ownership property rules. Therefore, consult with a lawyer in your state who has real property experience before you settle on which title to use for your property.
In a joint tenancy, two or more people own a single, unified interest in real or personal property. Here are the most important attributes of a joint tenancy:
A joint tenancy must be created by a deed or will, and must be created in both or all joint tenants at the same time. Usually, a joint tenancy is created by specific language: “To A and B as joint tenants with right of survivorship.” At common law, A (owner of a fee simple) cannot create a joint tenancy between himself and another by conveying “to A and B as joint tenants.” But many states, by statute or case law, now permit this result.
There are a number of ways in which a joint tenancy may be destroyed. Severance normally results in the creation of a tenancy in common. A joint tenant may convey his interest to a third party. Such a conveyance has the effect of destroying the joint tenancy.
Another way a joint tenancy can be destroyed is if all of the joint tenants die, or if one survives. The remaining tenant owns the property in fee simple. In other words, completely.
Generally, a tenancy in common is a form of property ownership in which several people each own an undivided fractional interest in the entire property. For instance, if five people wanted to acquire a $100,000 property but each investor had only $20,000 to invest, the investors could pool their funds and acquire the property as tenants in common. Each would own 1/5 of the entire property. Alternatively, let us say one person has $30,000 and another has $10,000, and the other two have $20,000. In that case, the person investing $30,000 would own 30%, the $20,000 investors would each own 20%, and the $10,000 investor would own a 10% interest.
A tenant in common’s share of the property does not pass automatically to a surviving spouse like a joint tenancy does. When one tenant in common dies, a probate hearing is necessary to pass the deceased owner’s share to the surviving spouse or other heirs or devisees.
Unless a title contains the phrase “…as joint tenants” almost all state courts will presume a concurrently owned property is titled as a tenancy in common.
A tenancy by the entirety is very similar to a joint tenancy with a few exceptions:
If tenancy by the entirety is so similar to joint tenancy, then why have it? The answer is history. Tenancy by the entirety is modified version of English common law from a time when a couple married, the two were seen as legally one person with the husband making all of the decisions regarding land ownership. Indeed, it was not possible for married women to own real property separately until the early 20th century. That is not to say the modern version of tenancy by the entirety is undesirable. For example, in some states tenancy by the entirety can confound creditors who seek to place a claim on property titled in this manner.
The following table compares the three common concurrent ownership options.
| Property Title Options |
|Joint Tenants||Tenants in Common||Tenants by the Entirety|
|Summary||Equal interests in the whole property.||Separate but undivided interests in the property.||Created by husband & wife who are legally married. Recognized in <½ states.|
|Survivorship||When one joint tenant dies, the decedent’s interest is extinguished and the survivors continue to hold an undivided right in the property. Decedent’s will has no impact on the title.1||No right of survivorship. Deceased tenant’s interest pass to his/her heirs or devisees.||Same as joint tenant.|
|Formation||“Four Unities” are essential to formation: Time, Possession, Interest & Title. Must be equal shares & rights formed all at once.||Can obtain unequal shares of property by different deeds at different times.||Same as joint tenant.|
|Severance||An owner who destroys one of the four unities, including selling their interest, creating a lease (in some states), taking a mortgage in a title theory state, an agreement between the owners, or judicial sale.||Owner can sell his/her interest without permission of others.||Neither spouse can terminate the tenancy and thereby defeat the other’s right of survivorship by unilateral action.2|
|Possession||Each owner has the right to possess the entire property (i.e., unity of possession). No one has the right to exclusive possession of the premises. If one owner has sole possession, he or she does not need to pay the other owner(s) the rental value of the property. If the possessor sells resources from the land (such as timber or coal) he or she must account for the revenues to the other owners. The same is true for rentals.|
|Ouster||If one owner ousts the other(s) wrongfully, the possessor must pay the other(s) their share of the property’s rental value.|
|Contribution||The possessor who pays for improvements to the land cannot compel non-possessors to contribute. Unconsented repair costs will not compel contribution. Contribution is enforced for real estate taxes and mortgage payments.|
|Partition||Allowed by any owner, except for tenancy by the entirety. Amount paid my be adjusted for uncompensated repairs, improvements, tax payments & rents.|
| Notes |
1. Creditor of decedent cannot reach the surviving joint tenant’s interest because the interest shifted at the moment of death.
2. Termination results by a mutual agreement to terminate; one spouse dies; judgment is executed against husband and wife by a joint creditor of both; or divorce, which leaves the parties as tenants in common.
The table above is based on common law, and the details for each tenancy may be different in your state.
|Community Property States|
Ten states follow community property family law. If you reside in a community property state, this may have a significant impact on your ownership rights to your home and personal property. Married people in community property states can title real property they buy as a joint tenancy, tenancy in common, or tenancy in the entirety. In some states, they also have the option to title the property as community property.
The basic principal behind community property schemes is that a married couple is treated as a "marital community," which operates as a single entity for many legal purposes. In general, the earnings of either spouse during marriage, and all proceeds from those earnings, are deemed community property.
If a home is purchased by the couple as the family residence in a community property state, it may be considered to be owned by the marital community, even if only one spouse’s name is listed on the title. During the marriage, the spouses have equal rights to use and control the community property. Upon divorce, community property is divided between the spouses, often using equitable criteria. At death, the decedent spouse may transfer by will one half of the community property and the other half belongs to the surviving spouse.
Although spouses are allowed to own individual assets and incur individual debts, many community property states presume property purchased or debts incurred during the marriage were for the benefit of the community and thus are community property. California, for example, makes this presumption.
Let us start with a legally married couple who resides in a common law state — not one of the 10 community property states — who is about to buy a home. You have the option of picking one of the three concurrent ownership titles listed in the table above. If your top priority is to have a spouse assume 100% ownership of the property if the other spouse dies, then choose either a joint tenancy or a tenancy by the entirety. However, if each spouse would like their share of the property to be conveyed to someone else upon their death (such as his or her child), then choose a tenancy in common. If you do not make a conscious effort to pick one of the three when completing the deed, the state will assume you meant to choose a tenants in common.
Now let us look at a legally married couple who resides in a community property state. This is trickier because if a spouse purchases real property with community and not separate funds, community property law can trump the title if a spouse dies, or if the couple divorces. Couples buying homes in community property states should consult with a lawyer if one or both spouses wish for their interest in the property to be inherited by someone other than spouse.
Now let us look at partners buying property who are not married to each other. Here, the choices are either a joint tenancy or a tenancy in common. In a joint tenancy, all partners must contribute an equal amount of money (called an equal interest), and be titled at the same time. In a joint tenancy, if one owner dies, his or her interest is rolled-into the interest(s) of the surviving partners at the moment of death. Therefore, if you want someone other than your other joint tenant(s) to inherit your interest in a property, choose a tenancy in common.
For partners buying property who are not married to each other, a tenancy in common is the only option if the partners’ interests are not the same amount.
If your ownership situation is complex, and especially if you are married and you want someone other than your spouse to inherit your interest in the property if you die, consult with a lawyer who has real property experience to learn more about real property law.