Real Estate Tenancies Explained

There are three principal types of tenancies related to the ownership of real estate. Perhaps the most popular, and most familiar, is the joint tenancy. If two persons own a property as joint tenants, upon one persons death, the other person automatically owns all of the interest in the property. There is no limit on the number of persons that can hold property as joint tenants. If a husband and wife own a property together and add their child to the deed, each will own a one-third interest in the property. Upon one of their deaths, the two surviving persons will each own a one-half interest in the property.

In the event that a joint tenancy owner is sued, and a judgment is entered against that owner, the owners interest in the property is subject to attachment by the creditor. In addition, any co-owners can bring an action to divide the interest in the property, and attempt to force the other owners to sell their interest.

A tenancy in common is where each owner of the property has an undivided interest in the whole of the property. However, upon the death of any owner, his or her share will pass to his or her decedents by will or by intestacy. Unlike a joint tenancy where each owner owns an equal portion of the property, tenancies in common do not require equal ownership. For example, in a tenancy in common, there could be three owners with one owing 50%, one owning 30% and one owning 20%.

A form of ownership allowed in many states is the tenancy by the entirety. In this type of ownership, only a husband and wife may own the property. The advantage of a tenancy by the entirety is that, in the event that either the husband or wife is sued (individually), a creditor may not take action against the property while it is held jointly by the husband and wife. In addition, neither the husband nor the wife may divide the ownership by deeding his or her interest to another person. Further, in order for a mortgage to be placed on the property, both the husband and wife must sign the loan documentation.

In some states, if there is no tenancy stated, there is a presumption that the owners are tenants in common, and if one person dies, then his or her interest in the property will need to be probated, even if the decedent desired for the property to pass to the surviving co-owner (including the spouse).

As you can see from the above, tenancy should not be taken lightly. We recommend a careful review of all property deeds on a regular basis to ensure that the properties are properly held in accordance with your desires.