Many times when people decide to purchase a piece of real property (land/real estate) together, they do not understand that how title is held to that property can have serious implications down the road. This is especially true when the relationship between the people who own the property together no longer get along. Below is a basic primer on the ways for people to own property together and the implications of each.
Tenancy in Common
In Michigan, if you own real property with one or more other people (unless you are married, as discussed below) it is presumed that you own the property as “tenants in common.” That means that each owner has an independent right of ownership in the entire property. But what exactly does that mean? Among other things, it means:
Each owner can use the entire property, not just a portion of it.
- Each owner can sell their interest to someone else. That means you might end up owning the property together with someone new down the road.
- If only one owner uses the property, the other owners are not entitled to rent from the owner that is using the property.
- Each owner has the right to ask a court to sell the entire property.
- If you spend money to maintain the property, you might not be able to get reimbursement from the other owners.
- Each owner has the right to rent the property to someone else.
- If one of the owners dies, the ownership does not pass to the other owners, but to deceased owner’s heirs (if they die without a will) or to their beneficiaries (if they die with a will).
In order for a “joint tenancy” to be created between multiple owners, the deed to property needs to “expressly” state that the owners are taking title as “joint tenants.” They also all need to take titled to the property at the same time. If owners hold title as “joint tenants” that means that they have what is known as a “right of survivorship.” For instance, if three people own a piece of property together, if one owner dies, that person’s ownership interest passes to the other two owners in equal proportions. But what happens if instead of dying, one owner decides to sell their interest in the property to someone else. This is where things get a little weird. The new owner will own the property as tenants in common with the other two owners, BUT, the other two owners still own the property with each other as joint tenants. I know, it’s confusing.
Other than the above, holding property as “joint tenants” is pretty similar to holding it as tenants in common.
Joint Tenancy with Full Rights of Survivorship
This is close to the same thing as a being a “joint tenant,” but slightly different. The deed must specifically state that the owners own the property as “joint tenants with full rights of survivorship.” In this type of ownership, one owner cannot sell their interest in the property without the permission of the other owners or encumber the property (like with a mortgage) without the permission of the other owners. The danger with this type of property ownership is that if the owners’ relationship with each other sours, one owner cannot ask a court to “fully” partition the property. Meaning a court will not give the OK to one owner if that owner wants to sell the property and the other(s) does not. This is going to sound morbid, but the only thing the owner that wants to sell can do is wait to see who dies first. Then total ownership with pass to the owner that survives.
Tenancy by the Entireties
This form of joint property ownership only pertains to owners that are married to each other and the property is transferred to them at the same time. No special language needs to be in the deed for this type of ownership to arise. The law presumes that if property is transferred to a married couple that they own the property as tenants by the entireties unless the deed states otherwise. When the one spouse dies, the property automatically passes to the surviving spouse. But what if the couple gets divorced? If that happens then the property converts to being held between the former spouses as tenants in common.
There is a lot more to all of this and this is certainly not an exhaustive treatise on these forms of joint ownership or the implications of each. If you are considering owning property jointly with someone else, it is always wise to contact an attorney to discuss the advantages and disadvantages of each. The attorneys at Tilchin & Hall, P.C. can help. Please give our firm a call at (248) 349-6203 or email us below. Please be advised that we cannot give legal advice over the phone and can only provide legal advice to our clients.
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