Ask About Co-Ownership - Part 1
Can you explain the differences between owning something in joint tenancy and in tenancy by the entirety? And what other ways of owning property are there, if any?
Who can blame you for being tentative, considering the confusing variety of co-ownership choices there are? Let's see if we can clarify these distinctions for you.
When you "own" property, you have the exclusive rights to possess and control the property, to use the property for pleasure or for profit, and to dispose of the property during lifetime by contract, deed, grant, or lease; or to dispose of it at death, by inheritance, by bequest, or devise. It also makes the owner responsible for all expenses and other charges in connection with the property.
When one person owns the property, all of these rights and responsibilities are vested in that individual. When two or more persons own the property, there must be some method of allocating the rights and responsibilities between the various co-owners. The rules governing the rights and duties of property co-owners are determined by state laws and, therefore, are somewhat different in each of the various states.
Most states have adopted the laws handed down from the old English common law system, and continue to use the old terminology, such as "tenant" meaning owner and "tenancy" meaning ownership. In addition, a few states, when dealing with property held jointly by a husband and wife, have borrowed from the civil laws of Spain and France and have adopted a system of "community property" or "marital property."
The laws of the state in which the property is located usually prevails. For example, if a person who resides in Illinois owns a parcel of property located in Alabama, the laws of Alabama will determine the ownership rights and the form and content of the various legal documents and procedures involved in the selling, leasing, financing, inheritance, bequest, or devise of the property.
There are four types of co-ownership:
- Tenancy in common is used when property is held by two or more persons and, upon death, each owner's interest passes to his heirs or devisees.
- Joint tenancy with right of survivorship is used when property is held by two or more persons and, upon death, each owner's interest automatically passes to the other co-owners.
- Tenancy by the entirety applies only to husband and wife during the marriage.
- Community property applies only to husband and wife who reside or own property in a state that has enacted the community/marital property laws.
We'll continue our discussion of co-ownership with more details on the various forms ownership can take in Part 2.