05/25/2022
When a residential real estate purchase closes, the title interest in the property is vested in the name of the buyer.
One of the most common questions I receive from residential real estate buyer clients relates to the best way for one to vest title of purchased property in their name.
In Florida, the most common ways in which to hold title to residential real property are Sole Ownership, Tenants in Common, Joint Tenancy with right of survivorship and Tenancy by the Entireties. The following provides a brief introduction to each:
Sole Ownership of Residential Real Estate:
Sole Ownership is the simplest form of real estate ownership and is generally held by unmarried individuals or married individuals who wish to assume sole title in non-homestead real property for investment purposes.
Usually, a spouse who invests in real estate properties may do so without the involvement of the other spouse simply by executing an affidavit or Quit Claim Deed relinquishing any ownership interest in the property.
While sole ownership provides buyers with the most simplistic option for solitary ownership of a piece of residential real estate, it lacks any tax or estate planning benefits. For instance, when a sole owner passes away, the solely owned property remains subject to delays due to having to go through the probate courts and, consequently, increased costs.
Tenancy in Common of Residential Real Estate:
Tenancy in Common is used when two or more individuals, who are not married to each other, take title to real property.
Each tenant in common owns a specified interest in the property that may not necessarily be equal shares. However, the percentage of ownership of each tenant in common is usually specified in the deed.
Since there is no right of survivorship in this form of ownership, one of the main advantages of owning real property in this manner is that each tenant in common may pass his or her interest in the property via a will to whomever they choose.
This, however, leads to the greatest disadvantage: tenants in common may end up co-owing property with complete strangers. Consequently, if the tenants ever found themselves at odds as to the property, one party may bring a partition lawsuit against the other to sell the property.
Another disadvantage that may arise is that this form of ownership may also lead to one tenant’s creditor levying on a co-tenant’s undivided interest to satisfy a debt owed.
Joint Tenancy with Right of Survivorship in Real Estate Transactions:
Joint Tenancy with Right of Survivorship provides an alternative option to Tenancy in Common and is often used amongst close family members who prefer to keep the ownership interest in the property within the family.
Under such ownership, all co-owners must have taken title at the same time and share equal interest in the property.
Further, since each joint tenant has a right of survivorship, when one passes away, that joint tenant’s rights pass to the other joint tenants. This avoids many of the disadvantages encountered with tenancies in common including probate costs since the surviving tenant usually only needs to record an affidavit of survivorship and provide a death certificate to clear title.
However, in lien theory states such as Florida, one joint tenant mortgaging his or her interest in the subject property effectively destroys the joint tenancy leaving the lender with a mortgage on only a partial interest in the property. The other joint tenant’s interest will not be affected. Accordingly, Joint Tenancy with Right of Survivorship can pose its own set of unique challenges if incorrectly utilized.
Tenancy by the Entirety in Residential Real Estate Transactions:
Tenancy by the Entirety ownership of real property can only be created between individuals who are married to each other at the time the property is acquired.
In this case, each spouse holds an equal and identical interest as the other that cannot be severed so long as both spouses are alive and remain married.
Similarl to Joint Tenants with right of survivorship, each spouse’s interest passes to the other upon death.
However, creditors of one spouse alone may not attach to the property. If the spouses ultimately divorce, thereby destroying the main factor needed for tenancy by the entirety, then the parties are considered to own separate, but undivided interests in the subject property, like with tenants in common.
If you have any questions regarding how to hold title to property in Florida, call 941-313-0668 for a free consultation.
