Holding Title to Real Estate With Other People

When you buy real estate as a unmarried person, how you hold title is easy. You have complete control of ownership of the property. If you are married, or if you are buying a piece of real estate with someone else, there are few different methods to hold title to the property, and each one has important consequences. Let’s take a look at some of the ways multiple people can own real estate together.

(This is the part of the post where I need to mention that this is not legal advice. Some of these forms of ownership need the help of an attorney, so get one if you need it! I also need to mention that I am writing this from the perspective of a resident of Washington state. Washington has community property laws. Some states do not, so you need to research this for whatever state you are in.)

Community Property

Washington is a community property state. This means that any real estate purchase by two people who are married or registered domestic partners will automatically own the real estate together as community property. Even if your spouse buys a piece of real estate without you signing the purchase contract, it will automatically be owned by both of you as community property unless you take actions to make it separate property.

  • How you own the property: You own the property as a single community, there are not two half interests in the property.
  • How you sell the property: Both co-owners must agree to sell the property
  • What happens upon death:  The deceased’s half may be given by will, or it passes to descendants by laws of succession. The spouse is the primary heir.

Separate Property

Separate property is the opposite of community property. It is everything that a husband and wife own separately. This includes property that was owned prior to marriage, anything inherited or received as a gift during the marriage, or anything earned after a separation. It can also be anything that one spouse gives to another during marriage in writing.

Separate property can actually become community property during a marriage if it becomes mixed with community property. A simple example would be a house that a husband bought a house with only him on title. His wife then proceeds to pay the mortgage from her income over a number of years. The house has now become mixed with community property and can no longer be indentified as separate property.

  • How you own the property: You own the property as your separate property, and manage its income, expenses and sale independently from your spouse and your community property.
  • How you sell the property: Separate owners can sell their property independent of their spouse, unless the property has become comingled with community property.
  • What happens upon death:  The deceased owner passes their interest to their heirs via will or laws of succession.

Tenancy in Common (TIC)

Tenancy in Common is a method for any number of people to hold title to real estate. You can divide up the ownership percentages equally or have different percentages for each owner. For example, Person A owns 80%, Person B owns 10% and Person C owns 10%. Each tenant in common may sell or pass their share of the property through their will.

  • How you own the property: Each owner has separate legal title to their own undivided interest. The owners’ shares in the property are assumed to be equal, unless a written agreement stipulates differing ownership percentages.
  • How you sell the property: Each owner can sell their share of the property independently of the others.
  • What happens upon death: The deceased’s ownership passes to their heirs via will or laws of succession. The other co-owners’ ownership interests do not change.

Joint Tenancy with Right of Survivorship

Joint Tenancy with Right of Survivorship is a method for any number of people to own real estate. In contrast to Tenancy in Common, joint tenants all have equal interests in the property and if one them dies, their interest in the property is automatically transferred to the other joint tenants, which is why it is called “right of survivorship.” This form of ownership is often used where people want to hold title together and want to automatically transfer their ownership to the other owners upon death, thus avoiding the probate process.

  • How you own the property: All owners have equal interests and equal rights of possession.
  • How you sell the property: All joint tenants must agree to sell the property to keep the joint tenancy in tact. If one person sells their portion independently of the others, their joint tenancy is broken and the new owner becomes a tenant in common with the other owners and their right of survivorship no longer exists.
  • What happens upon death: If one owner dies, that owner’s interest will automatically pass to the surviving owner(s). The deceased owner’s interest no longer exists and cannot by inherited by their heirs.

Seek Legal Advice

All of this legalese can be confusing, but if you are are wanting to own property jointly with other people, proper legal advice is a must. By sitting down with an attorney, they can help you draft the appropriate legal documents that address the situations when one owner would like to sell, or when one owner dies.

Like I said, this article was written from the perspective of Washington State, which has community property laws. There are only ten states with community property laws, so your state may be similar, but many are not. Seek out the correct professional advice for whichever state you live in.