What Are the 4 Types of Real Estate Ownership?

Real estate can be owned by one person or entity or by multiple people or entities. Additionally, owners can divide ownership or control over property in different ways. The various ways to title real estate affect how the property is treated if the owner passes away.

While single or sole ownership involves just one owner, co-ownership or fractional ownership in real estate involves two or more persons or entities. The different types of co-ownership are tenancy by entireties, joint tenancy, and tenancy in common. Each type of real estate ownership has unique characteristics you should know about. This guide discusses the four types of ownership real estate in Massachusetts and their nuances.

1. Sole Ownership in Real Estate

Sole ownership is one of the simplest ways to own property in Massachusetts. As the name suggests, one person holds the title to the property in their name to the exclusion of all others. In other words, property ownership is vested in an individual and has the deed in their name. A classic example is when a person buys a commercial property like a store, warehouse, restaurant, office building, or residential duplex in their own name.

Generally, a single person holds the property without sharing interest with any other person. For married couples, one spouse may decide to hold the property apart from the other, although there are exceptions. Sole ownership also means that the individual may sell, lease, or transfer the property to another person without anyone’s consent or authority. The individual typically has complete control over all decisions related to the property.

While straightforward, sole ownership of real estate offers little liability protection from third parties. Any action against the individual may allow the creditor to attach the property to satisfy the debt. As a result, some business owners create trusts or set up entities to hold title to the property.

Properties owned by one person often must go through probate when the owner passes away. Probate is the court-supervised process of handling a deceased person’s affairs and assets. Probate procedures are costly and time-consuming, making them unattractive to many. However, with the assistance of an experienced attorney, things can get easier.

2. Tenancy by the Entireties

Tenancy by the entirety is one of the forms of co-ownership but is only available to married couples. In this arrangement, each spouse has the right to occupy and use the real estate because there is an undivided interest in the property.

Additionally, there is a right of survivorship, which means that if one spouse dies, the surviving spouse takes ownership of 100% of what the spouses owned together when they were both living. The surviving spouse takes this ownership automatically. Generally, the document conveying the property will expressly state that the property is being conveyed as a tenancy by the entireties.

Tenancy by entireties is more restrictive compared to sole ownership. A spouse may only transfer ownership interest with the consent of the other. None of the parties may sell, divide, or partition the property while still married if they want to continue holding the property as tenancies by the entirety.

Tenancy by the entireties prevents creditors from compelling one spouse to sell the property to satisfy the other’s debts. Even if the creditor places a lien on the property, they may not act until the non-debtor dies. If the spouse in debt passes away, the non-debtor spouse may take the whole property free from the creditor’s lien. Where the spouse in debt files for bankruptcy alone and the other spouse is debt-free, the property may not be sold to pay creditors.

However, spouses may be considered jointly and severally liable — meaning both have the same liability — for debts incurred to obtain necessities for either spouse or a family member.

There is typically no requirement to probate the property since after one spouse dies, the other automatically becomes the sole owner of the entire property. Generally, when the couple divorces, the arrangement converts to tenancy in common, with each owning half of the asset.

Despite the numerous benefits, tenancy by the entirety may not be suitable for commercial or investment properties. The arrangement is typically limited to the couple’s primary residence.

Except in the case of a mortgage or a devise or conveyance in trust, a conveyance or devise of property to two or more persons or a married couple creates a tenancy in common unless the document expressly states otherwise.

3. Joint Tenancy

The second type of co-ownership in real estate, joint tenancy, is where two or more persons share an interest in a property. To successfully create a joint tenancy, four features must be present. These features are called “unities.” Let’s break them down:

• Unity of interest: All tenants must have the same type of interest in the property.
• Unity of term: All tenants must acquire their interests at the same time and for the same duration.
• Unity of possession: All tenants must have complete and equal use and possession of the property.
• Unity of title: All tenants must obtain ownership through the same deed.

Like tenancy by the entirety, joint tenants have a right of survivorship — ownership passes to the surviving parties when a party passes away until only one remains. The surviving party takes the property absolutely. However, unlike tenancy by the entirety, joint tenancy is available to unmarried couples, and more than two people can create a joint tenancy. There is no restriction on the kind of properties that can be held in a joint tenancy. Business partners may acquire commercial real estate and hold them as joint tenants.

The surviving parties in a joint tenancy can avoid probate since the transition is automatic, saving the owners money and time. Also, the last surviving tenant may do as they please with the property because they become the sole owner. If the last surviving tenant continues to hold the property upon their death, it will distributed as part of their estate.

4. Tenants in Common

The final type of co-ownership in real estate is called tenancy in common. A tenancy in common arises when two or more persons own a property without a right of survivorship. It’s suitable for business partners who want to purchase commercial assets together but intend that each person’s beneficiaries or estate inherit their share.

Parties who hold commercial real estate assets can sell their share at any time with the consent of the other. It also allows each party to have a different degree of interest in the property. Each party is only responsible for a proportionate share of expenses, repairs, and taxes. The downside is creditors may attach one owner’s share in the property to satisfy debts.

Contact the Real Estate Attorneys at Calabrese Law Associates

Calabrese Law Associates assists businesses with real estate law matters. Our trained attorneys have experience working with companies in the Greater Boston area and provide tailored and effective legal services. If you have legal issues related to real estate or want to invest in property, whether alone or with others, contact us now!

This publication and its contents are not to be construed as legal advice nor a recommendation to you as to how to proceed. Please consult with a local licensed attorney directly before taking any action that could have legal consequences. This publication and its content do not create an attorney-client relationship and are being provided for general informational purposes only.

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