Sunday, February 26, 2006
When Sally Dumped Harry
Co-ownerships of fee simple interests in land.
***************************************************************************************
When Harry met Sally and they decided to purchase real estate, a variety of things could have happened as they relate to how title to the property could be held at any given time. This is so because whenever an interest in land is owned by more than one person, a concurrent estate or co-tenancy is created. The parties to the concurrent estate are referred to as co-tenants, or as joint tenants, or as tenants in common depending on the type of concurrent estate that is created. Common Law, in fact, recognizes three types of concurrent estates as follows:
[ ] tenancy in common;
[ ] joint tenancy with right of survivorship;
[ ] tenancy by the entirety.
[ ] Tenancy in common
Tenancy in common is the default form of concurrent estate and is entirely based at Common Law on one and only one principle, referred to as ‘unity’: the unity of possession. In this form of ownership each owner is regarded as owning separate and distinct shares of title, which may differ in size. Thus, Harry could own sixty percent of the title and Sally forty percent, or the other way around, depending upon how their respective contribution towards the purchase was configured. In a tenancy in common, furthermore, there is no right of survivorship. This means that in the eventuality that Harry passed away – say while hunting for quails in South Texas, for example - his share of the tenancy would transfer by inheritance to his heirs and would not go automatically to Sally. Which, of course, would be problematic for Sally if Harry had decided to leave his share of ownership to his long-time drinking pal Felipe, since history would have to be rewritten as in “When Sally met Felipe”.
A tenancy in common may be terminated when anyone of the following occurrences takes place:
[ ] by an agreement between the parties to sell one tenant’s interest to the other;
[ ] by an agreement between the parties to sell the whole interest to a third party;
[ ] by an order awarded by a Court to divide up a concurrent estate into separate portions representing the proportionate interests of the tenants. To this extent, there are two kinds of partition which can be awarded by Court: partition in kind and partition by sale. A partition in kind is a division of the property itself, whereas partition by sale constitutes a forced sale of the land, followed by division of the profits thus realized among the tenants.
It is important to know, moreover, that an original tenancy in common is not terminated merely because one party chooses to sell his/her own interest. The purchaser will simply become the new tenant in common.
[ ] Joint Tenancy
In a joint tenancy, both Harry and Sally would own an undivided interest in the whole of the property. As such, the essential feature of this type of ownership is the right of survivorship, that is when one tenant dies his share passes automatically to the remaining joint tenants. Contrary to the belief of some, there can be more than two joint tenants with each owning an undivided interest in the joint tenancy. Because of the right of survivorship, Harry could not leave his interest to anyone else in his will. Such being the case, upon his death as a direct consequence of the foresaid quail-hunting accident in South Texas, Sally would acquire automatically the whole of the interest in the estate.
At Common Law, four unities must be present and be maintained to create a joint tenancy:
[ ] unity of possession – this means that both tenants must have the right to possess the whole property. If one owner can prove that he or she has been improperly excluded from the property by the other, the joint tenancy will be invalidated.
[ ] unity of interest – all joint tenants must have the same type of interest in land, and the extent, nature and duration of such interest must be identical. For instance, Harry cannot have a fee simple and Sally a life estate, and this is so because in order for them to transfer possession of the estate both must sign the same agreement, so that the type of estate must be the same.
[ ] unity of title – all joint tenants must obtain their interest from the same document, like a will or a deed.
[ ] unity of time – all joint tenants must receive their interest at the same time.
Because of the fact that the right of survivorship could create unfairness, the law will recognize a joint tenancy only if it has been created expressly. If a document transfers title to two co-owners without specifying how title is to be held, the law will presume that they are tenants in common even if the four unities are present.
Moreover, the termination of any of the foregoing unities will result in the law implying that the joint tenancy has been severed. When this happens, it becomes a tenancy in common. Severance usually occurs in one of two ways: by the sale or mortgage of a joint tenant’s interest or by a Court order. The sale, mortgage or attachment of one joint tenant’s interest will create a tenancy in common, but only as far as that person is concerned.
For example, if Harry, Sally and Aunt Trudy are joint tenants and Aunt Trudy sells her interest, Harry and Sally remain, as between themselves, joint tenants of two-thirds of the property but they become tenants in common with the new co-owner of the one-third interest. Many people do not realize that under the law a joint tenant may freely sell, mortgage or lease his interest just like a tenant in common would, without requiring the consent or knowledge of the remaining co-owners. If Harry were to do so, therefore, he would sever the joint tenancy even though Sally was unaware of it – an excellent reason for Sally to dump him for good.
[ ] Tenancy by the entirety
Tenancy by the entirety is a type of concurrent estate available only to married couples, wherein ownership of the property is treated as though the husband and wife are a single legal person. Like a joint tenancy, the tenancy by the entirety also encompasses a right of survivorship, so if Harry dies the entire interest in the property passes to Sally without going through probate. In order for a tenancy by the entirety to be created, the party or parties seeking to create it must specify in the deed that the property is being conveyed to the couple "as tenants by the entirety".
Also, the parties must share the four unities necessary to create a joint tenancy plus a fifth unity, marriage. However, unlike a joint tenancy, neither party in a tenancy by the entirety has a unilateral right to sever the tenancy by the entirety - if it is to be undone, or if any part of the property is to be conveyed to another person, this must be carried out by both husband and wife. A divorce breaks the unity of marriage, leaving the default tenancy – a tenancy in common. Therefore, should Sally decide to dump Harry, title would be held as a tenancy in common.
Luigi Frascati
Real Estate Chronicle
