Co ownership of residential or commercial property in California can be accomplished by many approaches ranging from community residential or commercial property (for married couples) through tenancy in typical, to ownership by corporations, restricted liability companies, collaborations and trusts. After community residential or commercial property, JOINT TENANCY is probably the most commonly utilized approach ... and the most abused. While holding residential or commercial property as Joint Tenants is easily accomplished and, indeed, often immediately done for consumers by title business, genuine estate representatives and unskilled CPAs and attorneys, in truth it has considerable issues and is rarely the very best way to collectively hold residential or commercial property. In other words, both legal and tax concerns frequently occur to the shock and, sometimes, discouragement, of those who "took the easy way" and decided to keep collectively owned residential or commercial property as joint occupants.
This article shall talk about the basic law of joint occupancy and analyze both the advantages and the detriments of holding residential or commercial property in this manner. It will likewise suggest numerous alternative methods of holding title which solve much of the issues of joint tenancy.
Definitions and Basics:
The reader is invited to first review the post Realty Ownership and Transactions in the United States which goes over usually the methods of owning and buying and offering property in this nation. This post will assume the reader has currently read that more fundamental post.
Co ownership of residential or commercial property just indicates two or more people or entities owning title to residential or commercial property.
Co ownership can be achieved in many methods. Couple, in California, usually own residential or commercial property as community residential or commercial property, the title deed specifying, "X and Y, hubby and partner as community residential or commercial property," and this technique has considerable benefits explained listed below. Only a couple can collectively own residential or commercial property as community residential or commercial property.
The most typical techniques of co ownership of residential or commercial property aside from neighborhood residential or commercial property are occupancy in common and joint tenancy. Tenancy in Common is ownership of title to residential or commercial property by 2 or more persons or entities in any portion quantity. It is "undistracted" ownership which means that each individual owns a portion of the whole residential or commercial property. Thus, if you own 40% of a residential or commercial property in tenancy in common, you do not own any particular 40% of the lot however 40% of an undistracted whole residential or commercial property. (Compare this to condos in which you are provided a particular title to a particular space within a bigger lot.) The reader must review the article on Tenancy in Common Ownership of Residential Or Commercial Property in San Francisco and Bay Area Communities.
Joint tenancy is equivalent to tenancy in typical with 2 essential differences. First the co ownership need to be equal, e.g. each joint tenant owns the same percentage interest. Second, unlike tenancy in typical, when one passes away owning residential or commercial property as a joint occupant, one's part immediately and immediately is moved to the other joint renters by operation of law. This is called the right of survivorship. This right of survivorship supersedes contrary provisions in a Will or Trust, for it immediately vests at the moment of death ... before a will can effect disposition of the residential or commercial property. This triggers substantial issues in litigation, as discussed further listed below. If one holds residential or commercial property as joint renter, however commits some mistake or takes certain acts in the holding of the residential or commercial property talked about below, it automatically transforms the residential or commercial property to tenancy in typical, even if unintended and the holder of title and the other joint occupants do not understand of the act-another problem gone over below.
Title companies like joint occupancy since they recognize with it. It does have some advantages-but those benefits, discussed below, are frequently outweighed by serious problems, frequently produced by the relative ignorance of both the owners and the title business as to the legal effect and risks of holding residential or commercial property in joint tenancy.
The Advantages of Joint Tenancy:
1. Ease. Title business, real estate agents, and many attorneys are "used" to using joint occupancy as a way for any 2 or more individuals or entities to own residential or commercial property. All that require be done is to put on the title deed, "X and Y, as joint tenants" and the residential or commercial property is efficiently owned as joint tenancy. After hundreds of years of producing such title documents, the experts in the field feel comfortable with that technique. Attorneys are not required to produce the required title, unlike trusts, partnerships or corporations, thus cash was obviously conserved.
2. Transfer Immediate and Automatic Upon Death. There is no requirement to probate the estate or carry out other court hearings to attain the transfer to the other joint occupants upon death. By merely taping notification of the death of the joint tenant, the survivors increase their holdings by the quantity of the decedent's percentage interest, similarly. (If I die and owned residential or commercial property as a joint occupant equally with two other joint tenants, each of their one third interests automatically increase by half of my one 3rd, thus each afterwards owns fifty percent, as joint tenants.)
3. No Attorney Fees Incurred for Probating the Residential or commercial property. Before the introduction of revocable living trusts (See our article on Wills and Trusts) joint occupancy appeared an exceptional method of preventing what often totaled up to thousands of dollars in probate fees paid to executors and attorneys. Indeed, this was the normal validation provided to owners by real estate agents, title companies and banks. Since many couples now own residential or commercial property as community residential or commercial property or use revocable trusts, both of which get rid of all or the majority of the lawyer costs, this validation has actually been mainly gotten rid of but extremely few individuals recognize it. Nevertheless, it is clear that the cost of creating a joint occupancy deed and the cost of vesting title in the survivors is very little compared to probate costs or the cost of development of a trust, corporation or partnership.
4. Predictable. Joint occupancy is among the oldest methods of owning residential or commercial property and the case law involving it is hundreds of years old. One could quickly forecast what would happen in the future ought to legal disputes arise.
5. Apparent Simplicity. Since all one needs to do to create joint tenancy is to tape-record a title deed performed by all joint occupants mentioning, "X and Y (and others) as Joint Tenants" and because title business and real estate agents are utilized to such title holding, it seems simple and simple to develop this type of ownership and can be done in simply a day or more.
The Disadvantages of Joint Tenancy:
1. Restricted Ownership. Some organizations, which do not "pass away," may not be able to own residential or commercial property in joint tenancy.
