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Types of home ownership

What should I know?

Real estate is a kind of property that's made up of land, as well as any structure that sits on it. Improvements to the structure also count toward the property. The definition also includes any other resources that may appear on that piece of land including vegetation, livestock, crops, natural resources, and even water.

Real estate can be both commercial and residential. Commercial properties include office buildings, warehouses, shopping centers, and other types of retail space. Residential property, on the other hand, is made up of homes, condominiums, apartments, and any other type of property that is meant for residential living.

People can own real estate for their primary residence or to hold as an investment rental property. But how do you determine ownership of real estate? This is done through a title. So what exactly is a title? This article outlines the different kinds of real estate title as well as less common methods of holding title to real estate property so you can decide which method best meets your needs.

What Is Title?

The term title refers to a document that lists the legal owner of a piece of property. Titles can be issued to depict ownership of both personal and real property. Personal property is anything that doesn't include real estate such as appliances, antiques, or artwork. Real property, on the other hand, is anything tangible like real estate. Title for real property must be transferred when the asset is sold and must be cleared for transfer to take place. This means it must be free of liens or encumbrances that could pose as a threat to its ownership.

Unlike other real property assets, real estate ownership can take several forms, with each having implications on ownership transfer, financing, collateralization, and taxing. Each type of title method has its advantages and disadvantages, depending on an individual's particular situation and how one wants ownership to pass in the event of such things like death, divorce, or sale. The most common of these methods of title holding are:

  • Joint tenancy

  • Tenancy in common

  • Tenants by entirety

  • Sole ownership

  • Community property

Joint Tenancy

Joint tenancy occurs when two or more people hold title to real estate jointly, with equal rights to enjoy the property during their lives. If one of the partners dies, their rights of ownership pass to the surviving tenant(s). Tenants can enter into a joint tenancy at the same time. This usually occurs through a deed.

Tenancy In Common (TIC)

With tenancy in common (TIC), two or more persons hold title to real estate jointly, with equal rights to enjoy the property during their lives. So all aspects of the property are shared by the people named on the title. Unlike joint tenancy, tenants in common hold title individually for their respective part of the property and can dispose of or encumber it at will. This type of title can be entered into at any time—even years after other people entered into an agreement. Ownership can be willed to other parties, and in the event of death, ownership will transfer to that owner's heirs undivided.

Tenants by Entirety (TBE)

This method can only be used when owners are legally married. Tenants by entirety (TBE) is ownership in real estate under the assumption that the couple is one person for legal purposes. This method conveys ownership to them as one person, with title transferred to the other in entirety if one of them dies.

Sole Ownership

Sole ownership can be characterized as ownership by an individual or entity legally capable of holding the title. The most common sole ownership is held by single men and women, and married men or women who hold property apart from their spouse, along with businesses that have a corporate structure allowing them to invest in or hold interest in real estate. 

For married people who wish to own real estate apart from their spouse, title insurance companies typically require the spouse to specifically disclaim or relinquish their right to ownership in the property.

Community Property

Community property is a form of ownership by husband and wife during their marriage that they intend to own together. Under community property, either spouse has the right to dispose of one half of the property or will it to another party. Outside of real estate, property acquired during one's marriage is usually deemed community property.

Real estate acquired during a common-law marriage will also be considered to be held as community property. Anyone who has lived with another person as a common-law spouse and doesn't specifically change the title to the property as sole ownership—which is legally transacted with approval by the significant other—takes the risk of having to share ownership of the property in the absence of having a legal marriage.

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