With low interest rates and a glut of properties on the market, an increasing number of clients are looking to purchase real property. Many of those clients are purchasing the property with friends and family members and have questions about how best to take title to the property. Since joint ownership of property can take a number of forms, each conferring different rights and obligations upon the owners, it is important to understand the differences between the various forms of ownership.
Individuals who are not married to each other can own real property as tenants-in-common or as joint tenants with right of survivorship. In addition, spouses can own real property as tenants-in-the-entirety.
Owners who are tenants-in-common each own a share of the real property. They have the right to sell or transfer their own share to whoever they want without the consent of the other owners, either during their lifetime or by Will. Tenants-in-common need not own equal interests in the property. For example, if three people own a piece of property as tenants-in-common, each may have a one-third interest in the property, but one may have a one-half interest while the others each have a one-quarter interest. Since the ownership interests may not be the same for each tenant-in-common, it is important that the percentage of the property owned by each tenant-in-common is set forth on the deed.
Unlike tenants-in-common, when more than one person owns property as joint tenants with right of survivorship, it is assumed that each owner has an equal ownership interest in the property. Joint tenants are not free to sell or otherwise transfer their interest in the property to a third party without consent of the other owners. In addition, a joint tenant with right of survivorship cannot leave her share of the property to someone in a Will. That is because the right of survivorship essentially guarantees that the “last person standing” is the sole owner of the entire property. For example, if there are three joint tenants and one dies, the two remaining joint tenants automatically become the sole owners of the entire property. Upon the death of one of the remaining joint tenants, the survivor becomes the sole owner of the entire property. This is true even if the other joint tenants died with Wills explicitly leaving their interests in the property to a third party.
Although anyone can own property as tenants-in-common or joint tenants, only spouses can own property as tenants-by-the-entirety. In fact, in New York, even if the deed does not specifically indicate that ownership is by tenants-in-the-entirety, real property is assumed to be held by spouses as tenants-in-the-entirety absent language in the deed to the contrary. Even if a deed simply provides that the owners are “John Doe and Jane Doe, his wife,” it is presumed that John and Jane are tenants-in-the-entirety. If they wish to hold the property as tenants-in-common, the deed must specify that they are tenants-in-common and must indicate the size of each owner’s interest in the property. Like joint tenants with right of survivorship, tenants-by-the-entirety cannot dispose of their share as they please. Rather, upon the death of the first spouse, the surviving spouse automatically owns the entire property.
Because of the restraints on transferring interests in jointly held property, questions about who owns the property after the death of a joint owner and the conflicts that can arise between owners, it is good idea to consult an attorney when purchasing property with others to insure that you will be taking title to the property in the manner best suited to your goals.
This article first appeared in the November 4, 2010 issue of the Times Beacon Record Newspapers.
Linda M. Toga of The Law Offices of Linda M. Toga, P.C. is an East Setauket, New York attorney with a general law practice focusing on estate planning, real estate, marital planning, small business services and litigation.