If you want to buy a piece of New York real property with another person, what is the best way to structure your co-ownership? Generally speaking you have two options. The first is to title the real property as tenants in common. The word “tenants” here does not mean you are renting the property. It simply a legal term used on deeds. In this context, a tenant in common is simply someone who has the right to occupy the real property and owns some fractional interest.
There can be more than two tenants in common. As a group, the tenants in common legally hold a single, undivided interest in the real property, even though individual tenants may have unequal shares. For example, a property might have one tenant in common who owns 50% of the real property, while ten other people each own a 5% share. Each tenant in common holds their interest separately. This means they can sell their interest. Or if a tenant in common dies, their share will pass according to their will or other estate planning device.
The second way to title real property is as joint tenants. Sometimes this is called joint tenants with right of survivorship. Unlike tenants in common, joint tenants each have an equal interest in the real property. The “right of survivorship” refers to the fact that when one joint tenant dies, his or her share simply ceases to exist—the surviving joint tenants continue as co-owners. A joint tenant may still sell or transfer a share during his or her lifetime, but doing so severs the joint tenancy, and changes the ownership to a tenancy in common.
Tenants By the Entireties
In New York and many other states, there is a third type of co-ownership known as tenancy by the entireties. This is basically a form of joint tenancy available only to married couples. The key difference between joint tenants and tenants by the entireties is that in the latter, one spouse cannot dispose of his or her share without the consent of the other.
Which Is Best?
The main advantage of joint tenancy or tenancy by the entireties is that it can keep real property out of a co-owner's probate estate. This is because when a co-owner dies, the surviving tenants automatically acquire the deceased's interest without the need for judicial intervention. This can save significant time and costs. But there are also potential tax and legal issues with joint tenancies that may not make it the best fit for every situation. You should always consult with an experienced New York real estate attorney before entering into any sort of real property transaction.
It's also important to understand that New York law presumes co-owners are tenants in common unless the deed expressly states it is a joint tenancy. However, when a married couple purchases real property, the law presumes they are tenants by the entireties unless they specify otherwise. If you have further questions about real property titles, contact our offices to speak with an attorney today.