You might own a property with multiple owners. Maybe you are fortunate enough to live on a beachside property with numerous owners, or you inherited a home, your primary residence, and your siblings are more involved than you are. Whatever the case, it’s essential to understand real estate ownership when multiple owners are involved.
In this article, you will learn 10 important things about property with multiple owners, including the types and their benefits and downsides.
Two Types of Co-ownership
When more than one individual owns a piece of property, it is called co-ownership. Two types of co-ownership are joint tenancy and tenancy in common (TIC). Joint tenancy occurs when two people combine resources and purchase an item as joint tenants.
If one of the individuals dies or sells their share, the remaining owner becomes the sole owner of both their name and the deceased person’s share.
Tenancy in common occurs when two or more people purchase items together as tenants in common. They can have equal shares in the property or unequal shares. It depends on how they decide amongst themselves at the time of purchase.
If one or more of these owners die or sell their share, then those shares will be divided between remaining members according to whatever agreement they made at the time.
Joint Tenancy is the most common type of multiple ownership
A joint tenancy is a way to share the property with other people. It’s one of the two ways to own property as a group in the United States, and it’s the most common type of multiple ownership. In joint tenancy, each owner has an equal share of ownership and can sell or dispose of their interest without the consent of any other owners.
If you own property with numerous owners and one of the owners dies, you may want to be sure that their interest in the property will be transferred to another owner. It is possible to add new individuals as co-owners at any time by changing the title deed through substitution or transfer.
However, this can require filing paperwork with local government offices, depending on state law. It may also involve paying transfer taxes or fees for recording deeds at county courthouses where they keep the land records.
In Joint Tenancy, you can name a new owner to replace you when you die
This can be a good option for married couples who want to keep their finances separate but still want to share real estate ownership. To set up a joint tenancy, each person must sign a legal document with an agreement that says they will have joint ownership of the property and respond to financial obligations like paying taxes on it for their lifetime.
Suppose one owner dies with no other legal ownership arrangements in place. In that case, anything left to that owner’s spouse or surviving owner will automatically go into probate court, which takes time and money and leaves some decisions to a judge instead of being made by family members or friends.
When there are multiple owners on title documents, those owners have more control over what happens when one owner passes because they can all have a joint arrangement or decide whether they want another person added as an owner.
Tenancy in Common offer different levels of ownership
Tenants in common are not required to share equally or equally contribute to the property’s upkeep. They can be co-owners of a home who don’t live there, or they can be siblings who each have equal shares of an inherited house.
In any case, if you have more than one tenant in common concerning your property’s ownership, you’ll need to decide on certain rights and responsibilities before it becomes your shared asset. It offers different levels of ownership. One tenant could own 50% of the property, while another could own 25%.
Alternatively, tenants might have an equal share of the entire property. If an unmarried couple wants to go home purchase, this is a good option. Tenants in common have different levels of control over their share’s usage and maintenance costs. Some may pay all expenses, while others can opt out. Some may want their share sold off because they don’t want more than what they have paid.
In addition, tenants in common can make different decisions about who gets what when one owner passes, which is why it’s vital for all parties involved with this type of arrangement to have a complete understanding of what needs to be done now so that when the time comes later on, there won’t be any confusion or hurt feelings between those left behind after someone passes away unexpectedly early.
In Tenancy in Common, you can sell your share of the property
You can sell it to anyone you choose. The person buying your share may or may not be a partner with whom you already share ownership. The critical thing to remember is that each owner has complete control over the sale of their shares. There is no need for the other owners’ approval, and they have no say in who buys them out or at what price.
If one tenant wants to buy another’s share in a property, they will pay whatever fee they feel is fair based on market value and their needs and financial situation. If either party considers this amount too high or too low, they can walk away from negotiations without regretting anything.
It means that if you take 50% ownership of real property and another tenant in common owns a 50% interest, you can sell your shares to someone else. For example, you and another person decide to buy a house together as tenants in common. You agree that you will purchase 25% of the house for $200,000, in which the total price is $400k.
When buying this type of property, it’s important to note how much each owner thinks they should pay for their share and make sure that they are both comfortable with going into this arrangement without any agreements made beforehand about what would happen if one wanted out. Years later, one owner dies and leaves her share behind.
Now, two separate owners own 100% together but must figure out how best to divide ownership between them so they can continue living without problems. The other owner may make an ownership arrangement and decides he doesn’t want his part anymore and sells it back at an auction where someone else buys it instead.
The buyer then has the sole ownership since no other owners exist except themselves, which is called adverse possession. Adverse possession occurs when a third party acquires the title to a legal owner’s real property without the legal owner receiving compensation or engaging in any contract.
Each Tenant in Common can have a custom percentage
When you buy a property with two owners, each person owns the property differently. Each tenant may own 50% of the shares, and another may own 40%. They also have equal rights to use and manage their share. Another tenant may own 95% of the mortgage while another owns 5%. It means they are responsible for paying their monthly mortgage payment.
When buying a home, you don’t have to list yourself as an owner
If you’re looking to buy a property with multiple owners, you don’t have to list yourself as an owner. Several options allow you to purchase property without being listed on the deed and risking your liability.
You may buy in a limited liability company (LLC). A single-owner LLC is not required to disclose its memberships or members’ names on any public documents. It means that if someone were to ask who owns the property, they wouldn’t be able to find your name. There are still some good reasons to create an LLC with multiple owners.
For example, if you plan on sharing ownership of your property with family members or other people, this can help you avoid probate fees when one of those owners dies.
An LLC also offers more flexibility than a corporation or partnership because it can be taxed as a sole proprietorship or partnership, depending on the type of entity chosen. It can also offer more flexibility than a trust, which is only available in certain states and often requires court approval to change its terms. Freddie Mac makes a change to allow the transfer of ownership to LCC.
Borrowers may now transfer the title of the Mortgaged Premises to a limited liability company (LLC) or limited partnership (LP) under our permitted Transfers of Ownership requirements, provided they are a managing member or general partner of the entity to which the ownership is being transferred, and subject to other guide requirements.
You may also buy a real estate property using other legal structures like a trust or corporation. These structures can also protect you from being listed as one of the owners when purchasing real estate because they act as legal entities separate from yourself.
You’ll still have access, though you won’t lose control over when and where money is spent because these entities require some type of signature from all parties involved before spending any money from their accounts; this ensures accountability for everyone involved, so there’s no need for additional signatures after buying property together.
Adding another person to the deed can affect your credit score, tax liability, and mortgage payments
If you have a mortgage loan, adding another person can increase the money that must be paid each month. Adding another person will make you subject to more than one monthly bill. It is because of additional expenses like property taxes and homeowner’s insurance based on the house’s value.
Additionally, if two owners are on a property, they will likely have to split maintenance costs equally, such as lawn care or snow removal.
Finally, suppose there is not enough equity in the home for both owners’ mortgages.
In that case, it may be necessary for one owner’s loan to be paid off entirely before selling or refinancing again because lenders often require that every borrower’s name be on all documents related exclusively but not limited strictly to their debts as well as personal credit history before proceeding with any transaction involving real estates such as purchasing or refinancing property along with other financial products like auto loans or equity lines from banks/credit unions where someone else owns part ownership shares too.
A real estate attorney can help write an agreement for multiple owners
Hire an attorney to help you write a contract for numerous owners. The agreement should cover all the property purchase and sale legal, financial, and personal details. You should also include business details such as how much each owner will pay for their share of the property’s operating expenses and maintenance costs.
Suppose you make a partnership or limited liability company (LLC). An attorney can advise you on what document to create a partnership or LLC. The attorney can draft all documents necessary, including articles of organization, operating agreements, and bylaws, so no one has questions about their ownership.
A reasonable attorney knows the state law and local ordinances regarding these types of contracts, so make sure the attorney understands your needs before agreeing on anything specific.
Things to consider before purchasing a property
Joint tenancy, survivorship rights, mortgage payments, and ownership agreements are factors you must consider when buying a home with someone else. Before signing a contract or purchasing real estate together, your partners must understand the ownership structure, rights, and responsibilities as property owners. If you’re in this situation, here is what to keep in mind:
1. Get legal advice from an attorney specializing in real estate law before jointly signing contracts or purchasing properties.
2. Decide how much each person will put towards the down payment and closing costs.
Once this amount has been agreed upon and written into an agreement between all parties involved and signed by all, no one should be able to make changes without everyone else’s consent, including things like selling their share later on down the road, so someone doesn’t get stuck footing bills alone later if other members move out unexpectedly.
It’s a great way to ensure everyone understands what happens if one owner dies before all their debts are paid off. Otherwise, those left behind may lose everything.
Conclusion
While purchasing a piece of property with multiple owners can be an excellent investment, it does come with some risks. You must ensure that your agreement protects your interests and those of the other owner just as much as possible.
Knowing what you’re getting into before signing any documents is essential. It will help protect you from any unexpected financial burdens when buying a property with multiple owners later.
If there are questions about how something will work with different types of ownership, ask an attorney for advice before deciding. They may also suggest how to write an agreement so everyone stays on the same page throughout buying a property with multiple owners.