Multiple Owners of Real Estate – Deed Language Matters
By R. Kurtz (Kurt) Holloway with Sarah Stone
In Pennsylvania, there are three ways that multiple people can own real property at the same time: 1) Tenancy in Common, 2) Joint Tenancy with the Right of Survivorship (Joint Tenancy), and 3) Tenancy by the Entireties. In order to create these joint ownerships, the deed must contain the proper wording. For example, when property is conveyed to two or more people (who are not married), the law presumes that the property is held as tenants in common unless the deed clearly states otherwise. If the property is to be owned as joint tenants, then the deed must clearly express that there is a right of survivorship. Additionally, in Pennsylvania, when property is conveyed to a married couple it is presumed to be owned as tenants by the entireties unless there is clear and convincing evidence to the contrary.
Under a tenancy in common, each co-tenant has a separate, but undivided, interest in the property. The ownership is separate because they each own a percentage interest of the property, which is evidenced by each co-tenant having a separate title. Their shares are presumed to be equal until rebutted by credible evidence. The ownership is undivided because the property is not physically divided. Each co-tenant has the right to possess the entire property; no co-tenant has an exclusive right to any portion. Under a tenancy in common each co-tenant has the right to transfer his ownership interest freely during life and at death. At death, the co-tenant’s interest will pass according to his will or according to Pennsylvania law (law of intestate succession) if there is no will. Tenants in common may also divide the property into separate properties through cross-conveyances. If the co-tenants cannot agree on the division or if only one party wants to divide, an action for partition will be necessary to separate the property. Additionally, since the co-tenants’ interests are separate, there is no protection preventing a creditor of one co-tenant from filing a lien against that co-tenant’s interest in the property. In such an event, clear title to the entire property cannot be conveyed without the lien being removed by either paying it off (satisfaction) or obtaining a release either by negotiation or court action.
Under a joint tenancy, each joint tenant is viewed as owning an undivided share of the entire property. In order to create a joint tenancy, there must be four unities: 1) time, 2) title, 3) interest, and 4) possession. Unity of time means that each joint tenant receives their interest at the same time. Unity of title means that each joint tenant receives their interest in the same title. Unity of interest means that each joint tenant has an equal share of the same kind of interest. Lastly, unity of possession means that each joint tenant has the right to possess the entire property. If one of the unities is destroyed, the joint tenancy is terminated and is turned into a tenancy in common.
The unique feature of the joint tenancy is the right of survivorship so long as that right is stated specifically in the deed by which the joint tenants obtained title. This means that when one of the joint tenants dies, the surviving joint tenant becomes the sole owner of the entire estate. This feature precludes a joint tenant from disposing of his interest through a will. However, a joint tenant may still transfer his interest to a third party during his lifetime. Furthermore, a joint tenant may also have the property partitioned, and a creditor can attach a lien to the joint tenant’s interest creating the same issues as with a tenancy by common.
Tenancy by the entirety is a special type of co-ownership that is strictly reserved for married couples. Under a tenancy by the entireties, the law views a husband and wife as a single person that owns the entire property. For this reason, neither spouse has the right to convey the property without the consent of the other spouse, and neither spouse may use the property to the exclusion of the other. Tenancy by the entireties is similar to a joint tenancy in that the surviving spouse becomes the sole owner of the entire estate upon the death of the other.
A unique feature of the tenancy by the entireties is that a creditor of one spouse cannot place a lien on the property since neither spouse individually owns the property; instead both spouses own it as one person under the law. This means that if one spouse owes debt to a creditor, the creditor will only have an enforceable lien if the non-debtor spouse dies first. One exception to this rule is that the Internal Revenue Service can place a levy on property held in tenancy by the entireties even if only one spouse owes the tax debt.
When two or more people are considering how to own property together, it is important to think about your relationship with the other person(s), how you want to transfer your interest during life and at death, and what protection there is from creditors’ liens. Once you have thought through these factors, you will be better prepared to meet with your attorney who can review your options with you. Lastly, when real estate is being transferred to you get legal advice to determine the best way to have it titled for your situation.