In Pennsylvania, title to real estate can be held by co-owners in various ways – as tenants in common, as joint tenants with right of survivorship, as tenants by the entirety and as tenants in partnership. We are commonly asked what the differences are among these forms of ownership, and the issue often arises at the last minute in real estate settlements.
The most important distinctions among the various forms of co-ownership relate to what occurs upon death of a co-owner and what happens in the event a judgment or lien is lodged against one co-owner but not all.
If two or more persons own real property as tenants in common, each can transfer his part interest during life and each can pass on his ownership interest to his heirs upon death. In the case of a joint tenancy with right of survivorship, by contrast, upon the death of a co-owner the remaining joint tenant automatically succeeds to the interest of the decedent by operation of law; the interest of the decedent does not pass to his or her heirs, and the survivor ends up owning the entire parcel.
If the co-owners of the property are married, they would typically hold title as tenants by the entirety – a special form of ownership available only to married persons. In some ways, a tenancy by the entirety resembles a joint tenancy – the surviving spouse automatically receives the interest of the other spouse upon death. Tenancy by the entirety has the added feature that liens and judgments against either individual spouse do not attach to entireties property. Only encumbrances arising out of joint marital obligations can attach. This is to be contrasted with tenancy in common and joint tenancy, where liens against an individual co-owner can attach to that co-owner’s interest.
tenants in partnership hold real estate as a partnership, which is a separate legal entity. Unlike a tenant in common or a joint tenant, a tenant in partnership cannot sell or encumber any share of the property on his own. Also, as a general matter, partnership property is not subject to the debts and obligations of any individual partner, but only to partnership obligations.
In summary, while there are similarities among the various forms of co-ownership, there are subtle and important differences. The manner in which title to real estate should be taken depends upon a careful evaluation of various factors and may involve estate planning issues, debtor-creditor issues, tax considerations and basic business considerations. Understanding the differences in the forms of co-ownership is critical to proper planning.
The most important distinctions among the various forms of co-ownership relate to what occurs upon death of a co-owner and what happens in the event a judgment or lien is lodged against one co-owner but not all.
If two or more persons own real property as tenants in common, each can transfer his part interest during life and each can pass on his ownership interest to his heirs upon death. In the case of a joint tenancy with right of survivorship, by contrast, upon the death of a co-owner the remaining joint tenant automatically succeeds to the interest of the decedent by operation of law; the interest of the decedent does not pass to his or her heirs, and the survivor ends up owning the entire parcel.
If the co-owners of the property are married, they would typically hold title as tenants by the entirety – a special form of ownership available only to married persons. In some ways, a tenancy by the entirety resembles a joint tenancy – the surviving spouse automatically receives the interest of the other spouse upon death. Tenancy by the entirety has the added feature that liens and judgments against either individual spouse do not attach to entireties property. Only encumbrances arising out of joint marital obligations can attach. This is to be contrasted with tenancy in common and joint tenancy, where liens against an individual co-owner can attach to that co-owner’s interest.
tenants in partnership hold real estate as a partnership, which is a separate legal entity. Unlike a tenant in common or a joint tenant, a tenant in partnership cannot sell or encumber any share of the property on his own. Also, as a general matter, partnership property is not subject to the debts and obligations of any individual partner, but only to partnership obligations.
In summary, while there are similarities among the various forms of co-ownership, there are subtle and important differences. The manner in which title to real estate should be taken depends upon a careful evaluation of various factors and may involve estate planning issues, debtor-creditor issues, tax considerations and basic business considerations. Understanding the differences in the forms of co-ownership is critical to proper planning.
– Stu Cohen