Liz Schneider, President, North Coast Building Industry Association
Recently I was asked by two unmarried borrowers, “How should we hold title on the home we are buying?” I wanted to share with you the most common methods of holding title to real property. (Disclaimer: This is for information purposes only, and it’s always best to check with a real estate attorney.)
- Joint Tenancy with Rights of Survivorship
- Tenancy in Common
- Tenants by Entirety
- Sole Ownership
- Community Property (Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, Wisconsin. Puerto Rico)
There are different ways to hold title to real property, and each method has its advantages and disadvantages. With each example, I suggest that you contact an attorney or your estate planner to make sure that the way you hold title is appropriate for you and your family.
Joint Tenancy with Rights of Survivorship – Joint tenancy with rights of survivorship is when two or more people hold title to real estate jointly, with equal rights to enjoy the property while still alive. In the event of death of either party, the ownership rights pass on to the survivors.
- Advantage – The parties who own the real estate need not be married or even related.
- Disadvantage – If the property is sold, the title to the property cannot be transferred without the okay of the other person(s). Another disadvantage is that if a creditor has a legal debt to collect against one of the owners, and files a lien against the property to collect the debt, the lien will affect all owners.
Tenancy in Common – Tenancy in common is when two or more people hold title jointly, with equal rights to enjoy the property during their lifetime. However, it’s different from “joint tenancy” – tenants in common hold title “individually” for their respective “part” of the property. For example, three people could hold title, with one person having 50% ownership and the other two with 25% ownership each. Each person can sell their portion of ownership or will their percentage to another person in case of their death.
- Advantage – Allows for one owner to use their portion of the property for liens/borrowing purposes and not encumber any leans against the other owner’s portion/percentage.
- Disadvantage – If the property is sold, all liens must be paid off for a total transfer to take place.
Tenants by Entirety – Tenants by entirety is ownership “assumption” that a husband and wife are one person for legal purposes and conveys ownership as one person. This method can only be used when owners are legally married.
- Advantage – If one of the spouses dies, the title to the property is automatically transferred to the spouse and no legal action, will, or probate is needed for this to occur.
- Disadvantage – In the case of a divorce (depending upon state law), the “title” to the property automatically converts to “tenancy in common”, meaning that one owner can transfer ownership of their 50 percent to whomever they wish.
Sole Ownership – Sole ownership can be held by an individual person or an “entity”, like a corporate or a trust. The most common are single men or single women who buy real estate. However, a married person may want to hold title alone (without their spouse). In this situation, a title company or the laws of your state may require the spouse who will not take title to acknowledge that they know the other person is buying real estate and they do not want to be on title.
- Advantage – As a sole owner, no other owner needs to be consulted to sell or place a lien on the property.
- Disadvantage – Should the sole owner die or become incapacitated, the sale or transfer to the real estate would have to be settled in court. That is, unless the sole owner had a will or an official document (like a pre-signed deed) that gives ownership to another person.
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The North Coast Building Industry Association is your local not-for-profit trade association representing member companies involved in all aspects of home building, remodeling, and other aspects of services available to help you in the future as well as more information on the above topic. So, you can see it is for your protection that you use a NCBIA member. If you are unsure that your contractor is a member of the NCBIA or you are looking for a list of NCBIA members, you can “Find a Pro” on our website at www.ncbia.com or call 440-934-1090.
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