People own real estate either for residential or business purposes. The way in which legal title to real property is held can be extremely important to the approach people take when conducting their personal and professional affairs. In deciding who should hold title to property and what legal form ownership should take, many questions should be asked and thoroughly considered, including:
For what purpose is this property being purchased and what will its ongoing use be?
Is there more than one interested party?
Should control of and decision making about the property be held by only one person?
Who should be responsible for related expenses, such as for maintenance or improvements?
What are the local, state and federal tax ramifications?
Are there estate-planning considerations, such as upon the death of an owner who would take title and would probate proceedings be necessary?
Most commonly, people hold property in their individual names, for either residential or commercial concerns. This is obviously the least complex situation, since the individual owner does not need to worry about the roles, rights or liabilities of any co-owners.
Four types of joint real estate ownership exist:
Tenancy in common – two or more owners; most common type of concurrent ownership; each owner has right to possess entire property, but the legal interests may be unequal; no right of survivorship, so at his or her death each owner’s interest passes according to his or her will or the laws of the state if no will exists; sometimes used in business context
Joint tenancy – two or more owners with the right of survivorship, so at his or her death each owner’s interest passes by law to the remaining owners; usually used within families; joint tenants have equal interests in property conveyed to them at the same time by the same legal vehicle; each has right to entire property
Tenancy by the entirety – generally same as joint tenancy except only possible between spouses; right of survivorship; only available in about half the states
Community property – in a few states, property acquired during a marriage by joint effort is presumed to be equally co-owned by the spouses; passing of the property upon death varies by state
Taxation issues can vary significantly among these entitles and are a major consideration.
Ownership by an Artificial Legal Entity
The law, varying among the states, may provide for different legal entities that can hold title to real estate:
Partnerships, general or limited
Limited liability companies (LLCs) and limited liability partnerships (LLPs)
Corporations, C or S
Personal and land trusts
Real estate investment trusts (REITs)
Real estate mortgage investment conduits (REMICs)
Condominiums or cooperatives
This article is an attempt to provide only the basic legal concepts of property ownership. Real estate law varies somewhat from state to state and there can be significant federal considerations as well. Therefore, it can be especially important to consult an experienced and knowledgeable real estate attorney for detailed guidance in real estate matters. Legal advice may be needed because real estate ownership can affect many issues, among them tax, business and personal liability, property control and decision making, estate planning, administrative and legal costs, and even the quality of personal and business relationships among co-owners and/or future heirs or beneficiaries.
DISCLAIMER: This site and any information contained herein are intended for informational purposes only and should not be construed as legal advice. Seek competent counsel for advice on any legal matter.