There are three major forms of ownership when purchasers are holding title for their real properties, and each type of ownership has its own benefits and different requirements. To understand the different forms of ownership in holding title will ensure real estate owners to utilize certain asset protection benefits from creditors and certain benefits to avoid the probate, simply by choosing the right form of Ownership.
Below is a brief overview of the differences of three major different forms of ownership, which are Tenancy in Common, Joint Tenants with Right of Survivorship and Tenancy by the Entirety.
1. Tenancy in Common
a. Tenant in Common owners each take a divided fractional share of the property.
b. Each owner’s shar of the property can be sold or mortgaged without the consent of the other tenant in common owners. A tenant in common’s creditors can reach that tenant’s interest in the property, and in certain circumstances will be able to force sale of the property (via action for partition)
Therefore, each tenancy in common owner can sell their share of the property separately and through 1031 exchange.
c. The interest of a tenant in common passes by will/probate of that tenant in common. There is no right of survivorship in the other tenants in common.
2. Joint Tenants with Right of Survivorship:
a. Owners have no separate divided interest in the property as it is a unified interest.
b. Unlike a Tenancy in Common, each joint tenant owns an equal interest in the property.
c. When one joint tenant dies, the interest of that joint tenant passes to the other remaining joint tenant (not to that joint tenant’s heirs).
d. Joint Tenants and their creditors can sever the joint Tenancy Interest.
3. Tenancy by the Entirety.
a. Tenancy by the entirety is only available to married people.
b. NC LAW provides a presumption that grantees who are married intended to take title as Tenants by the Entirety.
c. Like a Joint Tenancy, Tenancy by the Entirety provides right of survivorship.
d. Unlike a Joint Tenancy, only a creditor of both spouses can reach the property.
e. Unlike a Joint Tenancy, a Tenancy by the entirety may only be severed with the consent of both tenants.
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