Real Estate Ownership Types

When you buy property you must determine the real estate ownership type that best fits your needs. The choice of ownership will affect the ability to transfer real estate in the future and has tax implications as well. It is up to you to explore the options and make a decision. As a real estate agent, I cannot assist you with that because I am not allowed to give legal advice or practice law. It is recommended to seek attorney advice if necessary. However, below I present you with different real estate ownership types that will help you make your decision.

Ownership in Severalty

Ownership in severalty occurs when the property is owned by one individual, corporation, or other entity. The term comes from the fact that a sole owner is severed or cut off from other owners. As the owner in severalty you have the sole rights to the property and sole direction to sell, will, lease, or otherwise transfer part of all of the ownership rights to another person.

Real Estate Ownership Types – Co-Ownership

When the title to a parcel of real estate is held by two or more individuals, those parties are called co-owners or concurrent owners. Most states commonly recognize various forms of co-ownership. We will go in details what real estate types of ownership are allowed in the state of Colorado.

Forms of Co-Ownership

During the lifetime of the co-owners, there may be no apparent difference between the various types of ownership. Only when the property is conveyed, or when one of the owners dies, will the differences become apparent.

Tenancy in Common

A parcel of real estate may be owned by two or more people as tenants in common. In a tenancy in common (TIC), each tenant holds an undivided interest in the property. The co-owners have unity of possession, meaning that each owner is entitled to possession and use the entire property, even though each holds only a fractional ownership interest. If there are two co-owners of a property, for instance, and no other division is specified in the deed conveying the property, each owns a one-half interest. It is the ownership interest, not the property, that is divided.

The deed creating a tenancy in common may or may not state the fractional interest held by each co-owner. If no fractions are stated, the tenants are presumed to hold equal shares, for example, if five people hold the title, each owns an undivided one-fifth interest. Each of the shares can also be held by a couple, whether married or in a civil union.

Because co-owners own separate interests, they can sell, convey, mortgage, or transfer their individual interests in the TIC without the consent of the other co-owners.  A share owned by a married couple can be transferred only with the agreement of both parties.

No individual tenant may transfer the ownership of the entire property. When one co-owner dies, the tenant’s undivided interest passes according to the decedent’s will, to the heirs identified by statute if there is no will, or by the terms of decedent’s living trust, if one was established prior to death.

When two or more single individuals or couples acquire title to real estate and the form of ownership is not indicated, the new owners are usually determined to have acquired title as tenants in common. The TIC has become popular in expensive urban areas because it allows a multi-family dwelling to be sold to multiple owners without the need to convert the entire property to the condominium form of ownership, which may entail a lengthy and expensive approval process. The downside of a co-owner’s TIC interest is that it may not be as easy to sell as property held in a different form of ownership. Formation of a TIC requires the use of an attorney to clarify the terms of ownership.

Joint Tenancy

Form of joint tenancy is when property owned by two or more people, whether married or unmarried.

The distinguishing feature of a joint tenancy is the right of survivorship. Upon the death of a joint tenant, the deceased’s interest transfers directly to the surviving joint tenant or tenants. Essentially, there is one less owner. No formal legal action is required, although the death certificate of the deceased owner should be made part of the public records and a copy retained by the surviving owner(s).

If there are only two joint tenants, the death of one of the owner’s terminates the joint tenancy. If there are three or more joint tenants, at each successive joint tenant’s death, the surviving owners acquire the deceased’s interest. In either case, the last survivor takes the title in severalty and has all the rights of sole ownership including the right to pass the property to any heirs.

NOTE: Colorado DOES NOT have tenancy by the entirety. Colorado is also NOT a community property state.