Real Estate Law

Real Estate Basics 101

     Parties can own property in a variety of ways under various state laws. Sometimes commercial properties are owned by individuals or businesses, and the same is true of residential properties. Real property can be owned by a single individual or entity, or it can be co-owned by two or more parties. When real property is co-owned, many kinds of legal issues can arise if one of the owners wants to make changes to that real property or to sell it. When this kind of situation arises, the parties will need to determine what legal options may be available to them, including partitioning the real property.

     Since different states have different laws concerning real property ownership, it is important for anyone with questions about owning, buying, or selling real property to consult with a lawyer in their state to ensure all real estate law matters are in compliance with state law. At the same time, since many states have relatively similar laws concerning the purchase, ownership, and sale of real property, it is possible to learn the basics of real estate law.

Different Types of Property Ownership

     Depending upon the state a party resides in and what kind of property is going to be purchased, owned, or sold, there are different kinds of property ownership that potential buyers or sellers should know about. Common types of property ownership in the U.S. include the following:

• Sole ownership: One single person or entity owns the property and holds title to the real property. The deed will be listed in the single individual’s name, or in the single entity’s name. In many situations involving sole ownership, a person will be the sole owner of commercial or residential property. However, a business with a structure that makes the business its own entity can also own real property through sole ownership. For example, a corporation is an entity, and as such a corporation can own real property as a sole owner. When a corporation or another business owns the property, only the business name will be listed on the deed. To be clear, a married couple does not count as a single entity and cannot own property as a sole owner. Rather, married couples are two parties for purposes of real property ownership and will own real property together in a different method of title holding.

• Tenancy by the entirety (TBE): This is a specific kind of real property ownership for spouses. With tenancy by the entirety, for the purposes of owning that particular real property, the spouses become a single legal entity. As such, one spouse cannot make a decision without the other spouse’s consent. Instead, any decisions made about the property must be made jointly. This method of real property ownership is only used in certain states.

• Joint tenancy: Joint tenancy is a type of real property ownership in which two people (or more) jointly hold title to real property and have equal rights to the property during their lifetimes. In other words, with a joint tenancy, all parties have equal rights to enter and use the real property. None of the parties need to be related by blood or marriage in order to hold property together as joint tenants (although they can be related by blood or marriage). The property is not portioned to each of the joint tenants, but rather as a whole is owned equally by them. If one of the joint tenants dies, that joint tenant’s ownership rights then pass equally to the remaining surviving owners. Depending upon specific state law, joint tenancy may or may not be an option.

• Tenancy in common (TIC): Tenancy in common is a type of ownership in which two or more persons jointly hold title to real property and have equal rights and access to the property. While this might sound exactly like joint tenancy, there are some clear distinctions. With tenancy in common, the owners hold title to their portion of the property, and they can do whatever they want with that portion of the property. Accordingly, with a tenancy in common, an owner can sell his or her portion of the property without the other owners having a say. A party’s ownership in the property can also be transferred to heirs. With tenancy in common, there is no right of survivorship.

• Community property: Some states are known as “community property” states, and these states classify nearly all property purchased by either spouse in a marriage (after the date of marriage) as community property that is owned equally by both of them.

Dividing Jointly Owned Property 

     Many different scenarios can arise in which co-owners of jointly owned property cannot reach an agreement about how to use the property, or whether to retain or sell the property. Most frequently, these issues will occur when people or entities own property through joint tenancy. When a party owns property through joint tenancy and they want different outcomes for the real property, they may be able to have the property partitioned. Each state has its own laws concerning partition actions, but in effect, a partition action can allow a joint property owner to seek one of the following:

• Partition in kind; or
• Partition by sale.

     A partition in kind means that the property owner is asking the court literally to divide the physical real property such that both or all owners would end up having rights solely to their own portion of the property. When property is partitioned in kind, the parties can make any decisions they want regarding their portion of the property and do not need to seek permission or an agreement from the other property owners. With a partition by sale, the property owner is asking the court to sell off the property and divide the proceeds among the owners of the property. Typically, a partition by sale will happen if a partition in kind is not practical due to the nature of the real property.

     Community property, differently, can be divided in a divorce case in community property states. This kind of property would not typically be subject to a partition action, although spouses who separate but do not divorce ultimately could seek a partition in kind or a partition by sale.

     Anyone who has questions about real property law should consult an attorney in their state about a title dispute.