If you’re thinking of buying a property with a friend or significant other, you should know that there’s more than one form of ownership in real estate. Depending on which form of ownership is chosen, each individual involved may have different rights or responsibilities. I’ve laid your options out for you below. Read them over so that you know which form of title, or ownership, is right for you.
Joint tenancy occurs when two people share an equal stake in the property during their lives. Then, when one person eventually passes, their share of the property goes to the other person. This type of agreement can also be drawn up between any two people, regardless of whether they are married or related.
However, the potential downside of this method of holding title is that you and your partner must make all the decisions about what happens to the property as a team. In addition, you’re tied together financial. If one partner has a judgement against them, the debt collector can petition the courts to force the sale of the property in order to repay the debt.
Tenants in common
This is the most common method of holding title between two (or more) parties that aren’t related. With this, each person involved has the option to own a different percentage of the property. Also, in the event that one of the owners dies, they have the ability to will their stake in the property to their heirs.
One huge advantage of this method is that each owner can use their stake in the property as collateral for financial matters, such as taking out a home equity loan or home equity line of credit. However, it’s important to note that, if there are ever any liens against the property, those need to be cleared before a transfer of ownership can take place.
A community property arrangement is most often used between two individuals who are said to have a “common law marriage” or are considered domestic partners. Under community property each spouse has the right to sell off their interest in the property or to will it to another person.
If, in the event of one partner’s death, you would like the ownership of the property to be transferred to the other partner, there’s is also something called “community property with right of survivorship”, which functions similarly to joint tenancy. However, it’s only allowed in certain states.