How many of you can name the three ways that individuals can hold title in real estate? To refresh your memory:
Tenancy in Common
Let’s first start with the default tenancy. By default I mean that if the deed into the individuals does not specifically state another form of tenancy, ownership will default to a Tenants in Common (“TIC”). For example, a deed from America’s Home Company, Inc. to John Trane and Bill Johnson will vest John and Bill in a TIC. Another example would be a deed to John Trane, as to a 40% interest and Bill Johnson as to a 60% interest.
Under a TIC, the individuals fully own the property and may enjoy, possess, convey, encumber – but all subject to the other tenant’s interest. What do I mean by “subject to the other tenant’s interest”? Examples (based on John and Bill taking title to the property):
- John sells his interest to Gary. Now Bill and Gary own the property.
- John leases the property to Gary. Bill and John on the property, with Gary having a leasehold interest over John’s interest.
- John gets a loan from USA Bank. The mortgage would only attach to John’s interest. If John quits paying and the bank forecloses, they wouldn’t wipe out Bill’s interest – leaving Bill and the bank in title after the foreclosure.
- A judgment filed against John would attach to the entire property.
Another key attribute to a Tenancy in Common, and the difference between it and the remaining two tenancies, is the lack of survivorship. With survivorship the surviving tenant inherits the left over interest in the property. Since a TIC does not have survivorship, the interest in real property will be inherited by the tenant’s heirs. For example, if John dies, his estate would need to be probated to determine who his heirs are (and they would be vested in title with Bill).
This leaves a Tenancy in Common with two main characteristics:
- Each tenant owns a portion of the property.
- No rights of survivorship.
- Liens against one attach to the entire property.
Tenancy by the Entirety
A tenancy by the entirety is a form of ownership that can only exist between a legally married couple. The couple must be married at the time they take title, evidenced in two ways:
- The vesting deed stating: John Smith and Mary Smith, as husband and wife, or;
- John Smith and Mary Smith taking title, later to file an Affidavit certifying that they were married at the time they took title.
A couple who becomes married after they took title would need to convey the property to themselves (i.e. John Smith and Mary Smith to John Smith and Mary Smith, husband and wife). Additionally, a married couple who divorces will sever the tenancy by entirety – defaulting down to a Tenancy in Common.
Tenants under a tenancy by the entirety enjoy the following benefits:
- Survivorship. Upon the death of one, the surviving spouse inherits the entire ownership in the property.
- Judgments must be filed against both individuals for them to attach/be a valid lien against the property.
- Both parties must convey and mortgage together. One may not act without the other.
Most underwriters will require that a Continuous Marriage Affidavit be obtained prior to relying on the benefits of a Tenancy by the Entirety.
Joint Tenancy with Rights of Survivorship
A Joint Tenancy with Rights of Survivorship (“JTROS”) is a blend between a Tenancy in Common and a Tenancy by the Entirety. If a JTROS is properly established, the tenants thereunder will be able to benefit from the rights of survivorship. To property establish a JTROS in accordance with 689.15, F.S., the vesting deed must state that a joint tenancy is being formed with rights of surviorship. For example, USA Home, Inc. to John Smith, Bill Harris, Joe Lloyd, as Joint Tenants with full rights of surviorship. In addition to the essential survivorship recitation, all joint tenancies must have the following for unities:
- Time. All tenants must have taken title at the exact same time.
- Title. All tenants must have title title in the same document.
- Interest. Each tenant must have the same interest in the land. John and Bill cannot have a 75% interest, with Joe having the remaining 25%.
- Possession. All tenants must share the same possession/control of the property.
A failure or severance of any of the above four unities will result in the JTROS being terminated and defaulting down to a Tenancy in Common.