There are several ways to hold title to property in Massachusetts. Being “on title” means that a person has record ownership over the property. How one chooses to hold title is dependent on several factors.
An individual purchasing property takes title individually, and that is the only option (unless using an entity to hold title).
When more than one person buys property, however, the owners must decide how to take title. There are several common choices, or “tenancies,” for multiple owners to take title:
- Joint Tenants with Rights of Survivorship
- Tenants in Common
- Tenants by the Entirety.
The appropriate tenancy depends on the situation, and how the owners desire to pass their interests along if they pass away. A fourth and increasingly common way to take title is through a trust.
Joint Tenants with Rights of Survivorship
Joint Tenancy is for situations where there is more than one equal owner. The interests must be equal, occurring under the same conveyance, and beginning at the same time. When one owner dies, their ownership interest goes by operation of law to the surviving owner(s). It is not necessary to go through the Probate Court for this to happen, and the most common way to establish title in the remaining owners is to record the death certificate in the chain of title. Either of the individuals may also convey their interest without the consent of the other, thereby breaking the “joint” tenancy.
Tenants in Common
Ownership as tenants in common permits owners to jointly own property, but each person’s interest may be sold or transferred or passed through inheritance laws. Business partners and people with unequal ownership percentages often utilize this form of tenancy. For instance, if three individuals own property as tenants in common, and there is no percentage of ownership indicated in the grantee clause in the deed, then each such tenant in common holds a one-third undivided interest in the whole of the real estate. However, if the parties so elect, different percentages for each tenant in common can be set forth in the deed, such as two of three tenants holding a 40% undivided interest in the property, and the remaining tenant in common holding only a 20% undivided interest in the property. If at any point, an owner decides that he does not wish to own the property, he may sell his ownership interest, and the buyer then becomes a tenant in common with the others. If an owner dies, his share does not automatically go to the survivors. Instead, his share will go to his devisees or heirs depending upon whether he had a valid will.
Tenants by the Entirety
Tenants by the entirety is a form of co-ownership that is available only to married couples. In this tenancy, each owner has the right to occupy and use the property. Each owner has an undivided interest in the entire property, and there is an automatic right of survivorship (like with joint tenants). Tenants by the entirety may not transfer their ownership interests without their spouse’s agreement. As long as the two owners remain married, neither owner’s interest may be sold, and the property cannot be divided or partitioned, even if one spouse is successfully sued in court. This prevents a creditor from forcing a spouse to sell the property for debts incurred by the other spouse. Although a creditor can place a lien on the property, the lien cannot be acted upon until after the death of the non-debtor.
In the case of a divorce, by statute the tenancy automatically converts to a tenancy in common, with each tenant owning half the property.
Ownership in Trust
Taking title through a trust is growing increasingly popular. There are several common forms of trust in Massachusetts: an inter-vivos, or living trust is commonly used for one or more owners. A nominee trust is another form of inter-vivos trust, where the trustee acts as the nominee of the trust beneficiaries (which could be another trust). These trusts help the owners avoid probate court proceedings in the event of a death of one or more of the owners, and allow title to real estate to be passed to successor trustees or to the beneficiaries. Since neither recording the entire trust declaration nor the schedule of beneficiaries is required in Massachusetts, many people use trusts for their anonymity. The trustee’s name is in the public record, but the beneficiaries can remain anonymous throughout their period of ownership.
Other Ways to Hold Title
There are also other types of ownership of real estate, such as the corporate entity, a limited liability company, and a partnership. All of these entities have their unique features and requirements. It is best to consult with us prior to acquiring ownership to real estate in order to determine the best means by which title should be held. If you have any questions about these ways to hold title, or other real estate issues, please contact our office.