Virginia Real Estate: Joint Land Ownership

If you are investing in property with a business partner or a family member, you need to know about the various ways that both your ownership interests can be structured. I last spoke about the different types and sizes of ownership interests. This article is dedicated to balancing the interests of multiple owners.

So how can property be owned by more than one person, and what are the benefits and negatives of each type of ownership.

Tenancy in Common

This type of ownership is most common between non-family members. A tenancy in common is where there are multiple people who have an ownership interest in a property. For example, three business partners could purchase a property together and all own the property as tenants in common. The partners are not required to have equal ownership interest in the property. Therefore, you can use this type of arrangement to have majority shareholders in the property.

The negative of this type of ownership style is that it does not common with a “right of survivorship.” This means that if one of the business partners pass away, the property will not automatically be divided between the remaining business partners. Instead, the property will be divided pursuant to that business partner’s estate planning documents.

Joint Tenancy

This type of ownership can be between either family members or business partners. The difference between a joint tenancy and a tenancy in common is that all members of a joint tenancy must have equal shares in the property. Furthermore, a joint tenancy must be created at the same time by the same deed. This makes planning a little more difficult. However, a joint tenancy can also have a “right of survivorship” if the appropriate language has been included in the deed. This makes the transfer of property much smoother in the event that one of the other owners are deceased.

Tenancy by the Entirety

The final major type of ownership interest with multiple individuals is restricted to husband and wife. A tenancy by the entirety is an ownership structure whereby both the husband and the wife own the property together.

There are several benefits to electing to utilize a tenancy by the entirety. The major benefit is that debt collectors cannot put a lien on the house unless the debt is owed by both the husband and the wife. Therefore, if one party has significant student loan debt, this may be the ideal ownership style.

The largest negative of this ownership structure is related to divorce or bankruptcy. If there is a mortgage on the house and someone needs to file bankruptcy, it may force both parties to file a joint bankruptcy. Alternatively, if the parties are getting divorced it will impact property distribution.

Why You Need a Lawyer

A lawyer is important in preparing to purchase property to help advise you on which type of ownership structure is best for your particular case. The list above is limited, and does not cover all potential types of ownership. Nor does the list fully explain all possible negative or positive consequences of each ownership structure. Consult with a lawyer before signing a deed so you have the ownership structure that protects you the most.

Virginia Real Estate: Types of Land Ownership

If you are a landowner or are thinking about purchasing land, there are several things you need to know before you begin your investment. Land comes in several different shapes, sizes, and types of ownership. These types of ownership can have significant impacts on several other aspects of your life including estate planning, liability for injuries on the property and much more. Ownership can be defined by several factors including how long you can stay on the land, what you are allowed to do on the land, and what other people who invested with you can do with the land.

So what are the major types of land ownership?

Fee Simple

This category of land ownership refers to a complete grant of title to the property. If you own land in fee simple, you own the land outright. The types of limitations that can be placed on a fee simple ownership are limited. A common example of a fee simple ownership is if your grandmother were to deed you complete ownership of the family farm. Common limitations on ownership may include that you are required to continue operating the land as a family farm. In the event that you fail to continue to operate the land as a family farm, you may potentially forfeit your rights to the property under some situations.

The law further splits up fee simple ownership into several subcategories, but those subcategories are best discussed with your real estate lawyer.

Life Estate

The next category of land ownership is a life estate. A life estate is a grant of ownership in land for a limited period of time. This period of time is commonly measured by the land owner’s life span. A common example of a life estate is if your grandmother were to deed you the family farm for your entire life time, the family farm to pass on to a grandchild at the time you are deceased.

Leasehold Interest

The next major category of land ownership is a leasehold estate. The most common example of a leasehold estate is a leasing agreement with a landlord. Upon signing a leasing agreement, you have an interest in staying in the land pursuant to the terms of the lease. Another example that is common in the rural United States is a leasehold farming interest. Many farmers in the rural United States lease farming land from the federal government. Some private industries also do this type of leasehold estate. For example, a cocoa farm may lease a house and the land to a tenant for farming purposes.

Condominiums

The last major category of land ownership is a condominium. A condominium is a larger property that has been split into several pieces. These pieces are then sold to individuals. These individuals are then allowed access to common areas, but must pay for upkeep of those common areas. This type of ownership structure is common in major metropolitan areas.

Why You Need a Lawyer

If you are considering purchasing land or selling land, it is important to know what your options are for categories of land ownership. You can bargain certain types of land ownership to increase or decrease the costs of ownership. Knowing your specific needs and outlining those needs can help you acquire the type of land ownership best for you. The categories above are not an exhaustive list of types of ownership.