Did you know that real estate ownership can take on different forms? It’s true. Each form of ownership can have its own unique and profound impacts on things like transfer of ownership and financing, as well as taxation and collateralization of the property. Because different forms of property ownership carry different implications on these important issues, there will be advantages and disadvantages to each type. Here, we will discuss some of the common forms of property ownership and the implications of each. Learn the basics so that you can make informed decisions regarding your property ownership options.
What are the Common Forms of Property Ownership?
The first common form of property ownership we will discuss is sole ownership. In the case of sole ownership, one person or one legal entity holds title to the property. With a single owner, you can see how one of the advantages of sole ownership is its simplicity. With one owner, transactions involving the property become simpler due to the fact that there is no other party with interest in the property that needs to be consulted with or authorize the transaction. One of the main disadvantages of sole ownership, however, is the fact that legal issues about transfer of ownership can arise should the owner become incapacitated or die without legal tools in place to properly address the transfer of ownership.
We will now move to common forms of property ownership that involve multiple owners of a piece of property. Joint tenancy, for example, is when two or more people jointly hold title to real estate. Each owner enjoys equal property rights during their lifetimes. In the event that one owner dies, their ownership rights automatically pass to the surviving owners because of the right of survivorship that comes with a joint tenancy ownership arrangement. This, of course, leads to one of the primary advantages of joint tenancy being the ease of ownership interests passing upon the death of an owner. The automatic transfer of property interests to the surviving owners also has the added benefit of avoiding probate, which can be both costly and time-consuming. Furthermore, joint tenancy has the advantage of all owners sharing financial responsibility for the property as opposed to a single person carrying such a burden. One of the disadvantages of joint tenancy, on the other hand, is that financing or use of property for income-generating endeavors must be approved by all owners. Furthermore, should a creditor obtain a legal judgment against one of the owners, they can petition the court to sell the property in order to collect on the judgment.
Tenancy in common is another common form of property ownership in which two or more people jointly hold title to a property. The owners can hold the property in equal or unequal ownership percentages. The percentage of property ownership, however, only relates to financial ownership of the property. Each owner has the right to use and occupy the property in its entirety. Each owner is free to dispose of their respective interest or encumber their interest in the property at will and each owner’s share of the property will be passed on to their heirs and not to the co-tenant, which is different than joint tenancy.
Real Estate Attorney
If you are considering property ownership, the team at BoyesLegal, APC can help assess which form of property ownership best suits your needs and purposes under the circumstances. Contact us today.