There are numerous ways of owning property, and that includes co-owning property. If more than one individual owns a property, regardless of the property type, the relationship between the owners is called a “tenancy.” As in any relationship dynamic, there are numerous ways that tenancy can be structured, especially because with a tenancy, there are more factors to take into consideration.
There are three forms of tenancy that tend to take the lead: tenancy in common, joint tenancy, and tenancy by the entirety. Each has its own advantages and disadvantages, but all must be properly drafted in the deed or conveyance. Otherwise, the deed will default to whatever state standards dictate, which may lead to undesirable results and restrictions.
Tenancy in common: this is perhaps the most flexible option of the three, as an owner can transfer the property as desired. Each co-tenant of a tenancy in common can transfer their interest in a property during life or through a last will and testament, and there can be differing levels of ownership interest as there is no need for equal ownership in a tenancy in common. This means any one tenant can transfer ownership at will to an outside party, who will then take over and become a common tenant with the other existing owners.
Joint tenants: All owners have an equal share in the property – so if there are three owners, each owner would own one-third interest in the property. If one owner passes away, the property immediately turns over to the other owners – the property cannot be passed down or handed off. Some people favor joint tenancy because it avoids any legal probation after an owner’s death.
However, both joint tenancy and tenancy in common can be used to repay a debt, which means the creditors can have the property interests divided and sold, regardless of the other owners’ wishes. Tenancy by the entirety is a third option that avoids the issue of creditors and debt, but is only available to married or civilly united couples. Should one member of a union pass away, the property immediately transfers to the other member. The property also cannot be used to repay a debt unless both members of the union consent.
Tenancy comes in many forms, and if it is unclear as to the form of tenancy a property is owned by, states will often assume the tenancy to be a tenancy in common. To learn more about tenancy and find the solution that best meets your need, contact Colony Title Associates today at 410-884-1160 or visit ColonyTitle.com.