Common Ways of Holding Title
How Should I Take Ownership of the Property I am Buying?
Real property can be incredibly valuable and the question of how parties can
take ownership of their property is important. The form of ownership taken --
the vesting of title -- will determine who may sign various documents
involving the property and future rights of the parties to the transaction. These
rights involve such matters as: real property taxes, income taxes, inheritance
and gift taxes, transferability of title and exposure to creditor’s claims. Also,
how title is vested can have significant probate implications in the event of
death.
The Land Title Association (LTA) advises those purchasing real property to
give careful consideration to the manner in which title will be held. Buyers may
wish to consult legal counsel to determine the most advantageous form of
ownership for their particular situation, especially in cases of multiple owners
of a single property.
The LTA has provided the following definitions of common vesting as an
informational overview. Consumers should not rely on these as legal
definitions. The Association urges real property purchasers to carefully
consider their titling decision prior to closing, and to seek counsel should they
be unfamiliar with the most suitable ownership choice for their particular
situation.
Common Methods of Holding Title
SOLE OWNERSHIP
Sole ownership may be described as ownership by an individual or other entity
capable of acquiring title. Examples of common vesting in cases of sole
ownership are:
1. A Single Man/Woman:
A man or woman who has not been legally married. For example: Bruce
Buyer, a single man.
2. An Unmarried Man/Woman:
A man or woman who was previously married and is now legally
divorced. For example: Sally Seller, an unmarried woman.
3. A Married Man/Woman as His/Her Sole and Separate Property:
A married man or woman who wishes to acquire title in his or her name
alone.
The title company insuring title will require the spouse of the married
man or woman acquiring title to specifically disclaim or relinquish his or
her right, title and interest to the property. This establishes that it is the
desire of both spouses that title to the property be granted to one spouse
as that spouse’s sole and separate property. For example: Bruce Buyer, a
married man, as his sole and separate property.
CO-OWNERSHIP
Title to property owned by two or more persons may be vested in the following
forms:
1. Community Property:
A form of vesting title to property owned by husband and wife during
their marriage, which they intend to own together. Community property
is distinguished from separate property, which is property acquired
before marriage, by separate gift or bequest, after legal separation, or
which is agreed to be owned only by one spouse.
Real property conveyed to a married man or woman is presumed to be
community property, unless otherwise stated. Since all such property is
owned equally, husband and wife must sign all agreements and
documents of transfer. Under community property, either spouse has the
right to dispose of one half of the community property, including
transfers by will. For example: Bruce Buyer and Barbara Buyer, husband
and wife as community property.
2. Joint Tenancy
A form of vesting title to property owned by two or more persons, who
may or may not be married, in equal interest, subject to the right of
survivorship in the surviving joint tenant(s). Title must have been
acquired at the same time, by the same conveyance, and the document
must expressly declare the intention to create a joint tenancy estate.
When a joint tenant dies, title to the property is automatically conveyed
by operation of law to the surviving joint tenant(s). Therefore, joint
tenancy property is not subject to disposition by will. For example: Bruce
Buyer and Barbara Buyer, husband and wife as joint tenants.
3. Tenancy in Common:
A form of vesting title to property owned by any two or more individuals
in undivided fractional interests. These fractional interests may be
unequal in quantity or duration and may arise at different times. Each
tenant in common owns a share of the property, is entitled to a
comparable portion of the income from the property and must bear an
equivalent share of expenses. Each co-tenant may sell, lease or will to
his/her heir that share of the property belonging to him/her. For
example: Bruce Buyer, a single man, as to an undivided 3/4 interest and
Penny Purchaser, a single woman, as to an undivided 1/4 interest, as
tenants in common.
Other ways of vesting title include:
1. A Corporation*:
A corporation is a legal entity, created under state law, consisting of one
or more shareholders but regarded under law as having an existence and
personality separate from such shareholders.
2. A Partnership*:
A partnership is an association of two or more persons who can carry on
business for profit as co-owners, as governed by the Uniform
Partnership Act. A partnership may hold title to real property in the
name of the partnership.
3. As Trustees of A Trust*:
A trust is an arrangement whereby legal title to a property is transferred
by the grantor to a person called a trustee, to be held and managed by
that person for the benefit of the people specified in the trust agreement,
called the beneficiaries.
4. Limited Liability Companies (L.L.C.)
This form of ownership is a legal entity and is similar to both the
corporation and the partnership. The operating agreement will
determine how the L.L.C. functions and is taxed. Like the corporation its
existence is separate from its owners.
*In cases of corporate, partnership, L.L.C. or trust ownership - required
documents may include corporate articles and bylaws, partnership
agreements, L.L.C. operating agreement and trust agreements and/or
certificates.
Remember:
How title is vested has important legal consequences. You may wish to consult
an attorney to determine the most advantageous form of ownership for your
particular situation.