An extremely important aspect for any buyer of real estate to consider is how to take title to the property being purchased. A buyer often does not give enough consideration to the significance of this prior to closing. A buyer’s goals and intended use of the property play a large role in this decision. Consider such goals as asset protection, taxation, estate planning, the type of relationship a buyer will have with a co-owner, and the rights and liabilities of each co-owner.
When taking sole ownership, consider whether this provides the best option. There are multitudes of ways to structure ownership to accomplish your goals. If estate planning is of concern, you may take title in the name of a living trust, whereby the buyer as the trustee holds title to the property. For asset and creditor protection reasons, you may want to set up a corporation or limited liability company to hold title to the property. By holding title in a living trust or some type of entity, you are given the freedom to control the property as if it was in your own name, while still having the advantages of the increased protections offered by these forms of ownership.
If a property is going to be owned by more than one (1) person at the same time, there are several alternative ways to take title; however, the three (3) most common types available to co-owners are tenancy in common, joint tenancy, and tenancy by the entireties. Be aware that each form of title varies and offers different rights and issues.
The most frequently occurring form of co-ownership is a tenancy in common. Under Florida law, any conveyance to two (2) or more persons is presumed to create a tenancy in common unless a joint tenancy or a tenancy by the entireties is clearly stated on the deed. To create a tenancy in common, only the unity of possession need be present. Accordingly, tenants in common may acquire their respective interests by separate conveyances, at different times, and in unequal shares. All tenants in common have an undivided interest in the whole property, even though their ownership percentages may vary. As tenants in common, each co-owner of the property has the right to sell, lease, encumber, or devise his or her ownership interest in the property, all without first acquiring consent from the other co-owner(s). Moreover, the ownership interest as tenants in common may be attached and seized by creditors.
Another form of taking title is joint tenancy, which occurs when two (2) or more persons share the undivided ownership of a property with a right of survivorship. In order to create a joint tenancy, the deed must expressly provide for a right of survivorship, or it will be treated as a tenancy in common. With a joint tenancy, if one co-owner dies, his or her interest in the property automatically passes to the other co-owner(s). Therefore, one’s interest in a joint tenancy is not inheritable by heirs of that co-owner unless he or she is the last surviving co-owner. In order to properly create a joint tenancy, it is necessary for the four unities (i.e., time, title, interest, and possession) be satisfied, meaning all owners must take title at the same time, through the same deed, and each must own equal shares in the property. If these four unities are severed at any point by the co-owners, then such ownership will be converted to a tenancy in common.
Similar to joint tenancy is a tenancy by the entireties; however, this form of ownership is limited to married couples who wish to hold joint title in the name of both spouses. Under Florida law, a conveyance to spouses as husband and wife is presumed to create a tenancy by the entireties in the absence of express language showing contrary intent. Because marriage is an essential element to the creation of this form of ownership, the divorce or dissolution of the marriage destroys the tenancy by the entireties and converts the ownership to tenancy in common. Like a joint tenancy, a tenancy by the entireties has a right of survivorship attached to it, and the surviving spouse acquires the whole property upon the passing of the other spouse. Neither spouse can convey any of the property without the approval of the other, and each spouse is considered to be an owner of the entire property. Of important note is that a creditor’s judgment against one spouse is not enforceable against property owned as a tenancy by the entireties.
As the article summarized above demonstrates, there are a great number of factors to consider when a buyer is taking title to a property and this is a cursory overview of some of the many considerations a buyer should be aware of and by no means covers all facets of this topic. Because of this, it is important to be familiar with the different forms of ownership. Buyers should seek legal counsel from a knowledgeable attorney familiar with this area of real estate.