In August, this blog discussed the question that every real estate purchaser needs to ask himself prior to the closing process: “Is title insurance necessary?” As that blog mentioned, title insurance is designed to insure the purchaser against certain defects in the title to the property. Although many people understand that the title to a parcel of real estate can be defective, not everyone fully understands what owning title to a parcel of real property actually means.
A title to real property is a bundle of rights in which a person may own either a legal interest or equitable interest. Because these rights can be legally separated from one another, they may be held at different times by different parties. Similarly, these rights can also be held jointly by two or more individuals under different types of “tenancies.”
Tenancy in Common
A tenancy in common occurs when two or more individuals jointly hold separate and distinct shares of the same property. The individuals may own different percentage interests and these interests are transferrable by means of sale or inheritance.
Joint Tenancy with Rights of Survivorship
A joint tenancy with rights of survivorship occurs when two or more individuals jointly hold title to a parcel of real estate, and, when one of the tenants dies, his or her interest automatically passes to the other tenant. Unlike a tenancy in common, title is not divided into percentages; rather, each tenant is considered to hold title to the entire parcel of property, together with the other tenants.
Tenancy by the Entirety
A tenancy by the entirety is similar to a joint tenancy with rights of survivorship, although with some restrictions. First, a tenancy by the entirety is limited to two people holding title the property as tenants. Second, the tenants must be husband and wife. Third, the property must be the tenants’ primary residence.
Individuals most often elect to hold title to a parcel of property in a tenancy by the entirety to ensure that their interest is protected from potential creditors. A judgment that is levied against one, but not both, holders of a property that is held in tenancy by the entirety cannot be satisfied by the property. If the holders of a tenancy by the entirety divorce, their interests are automatically converted to a tenancy in common, subsequently becoming subject to claims by creditors.
A land trust is an arrangement by which the title to the real estate is held by a trustee, but all the rights of ownership are exercised by a beneficiary. The main benefit to holding property in a land trust is that, because the title interest is considered personal property, it can be transferred by assignment, thereby avoiding many of the formalities of executing a deed.
If you have questions regarding the real estate transactions, types of titles, or need additional information about real estate transactions, contact the experienced real estate attorneys at The Slater Firm, Ltd. today.