Property Law is one of the areas where the legal jargon can be so confusing that a property owner may not even understand what they own. This is especially true where there are multiple owners of the same piece of property. To clear up some of the confusion, I put together this primer on a portion of Property Law that I call “Concurrent Interests 101.” I still remember the first time that I understood the difference between tenancy in common and joint tenancy. Professor Kane, you were right, I would need to know this someday!
There are three types of concurrent interests in property: tenancy in common, joint tenancy and tenancy by entirety.
Tenancy in common means that each co-tenant (“tenant” in this context means “owner”) is the owner of a separate and distinct share of the property, which has not been divided between the co-tenants. In other words, each owner has a separate undivided interest in the whole. Tenants in common do not need to have equal interests in the property. Each co-tenant has the right to possess and enjoy the entire property with the understanding that each other co-tenant has the same right. An example of this would be several family members, let’s call them Brother A, Sister B, and Cousin C, purchasing a beach house as tenants in common. Each family member is able to use the beach house as if he or she owned it individually, but will need to consider that the other family members are able to do so as well.
Tenants in common do not have a right of survivorship, meaning that if one tenant dies, his or her interest passes to his heirs, not to the other co-tenants. In the beach house example, if Brother A dies, his share goes to his children or other heirs, not to Sister B or Cousin C.
Joint tenancy is similar to a tenancy in common, with a few significant differences. For instance, any joint tenant can convey his or her interest to a third party without the approval of the other joint tenants. Such a conveyance means that the new owner becomes a tenant in common with the other owners, but the original owners remain joint tenants with one another. This is confusing. I know. Applying the beach house example, if Brother A, now back from the dead, sells his interest to Nosy Neighbor, Sister B and Cousin C become tenants in common with Nosy Neighbor; but Sister B and Cousin C remain joint tenants with one another.
In addition, joint tenants have a right of survivorship. This means that if one joint tenant dies, his or her interest in the property passes to the other joint tenants, not to his or her heirs. Back at the beach house, if Brother A didn’t sell his interest, but instead dies, again, his interest goes to Sister B and Cousin C, not to his children or heirs.
There are four very specific requirements for establishing a joint tenancy: 1) interest in the property must vest to all joint tenants at the same time; 2) all joint tenants must acquire their interest by the same deed or will, 3) each joint tenant’s interest must be equal; and 4) all joint tenants must have a right to possess the whole.
Tenancy by the entirety is typically the manner in which spouses hold property together. In most cases, when spouses purchase a home they do so as tenants by the entireties. In a tenancy by the entirety, where one co-tenant dies, the other co-tenant automatically takes ownership. This happens by operation of law and does not require any formal conveyance.
A primary benefit of tenancy by the entirety is that the debts of one co-tenant cannot be recovered against the property, with some exceptions, such as federal income tax. Tenancy by the entirety can be separated by death, divorce or joint conveyance. No one co-tenant can unilaterally end a tenancy by the entirety.
Like I said, this is all rather confusing, but certainly something that is important to understand. We have all probably signed a legal documents such as a deed or a form opening a bank account that used one of these terms. While the type of ownership interest you have may not have seemed important at the time that you signed the document, it does have an impact on what happens to the property in the future. Consider consulting an attorney to ensure that your joint property is titled in the way that makes sense for your circumstances.