CO-OWNERSHIP OF REAL PROPERTY

Overview: Whenever one or more person(s) purchase real property together they are considered co-owners of the property. There are three main types of co-ownership: (1) tenancy in common; (2) joint tenancy; and (3) tenancy by the entirety. Each type of co-ownership has distinct requirements necessary to be created and provides different rights and obligations on the property owners. Although the type of co-ownership need not necessarily be specified in the offer to purchase or the purchase and sale agreement, it must be contained in the deed giving ownership of the real property to the co-owners. Understanding the types of co-ownership will allow brokers to better prepare potential co-owners to determine what type of co-ownership is best for them. Since each type of co-ownership has different rights and obligations, choosing the wrong type of co-ownership may be a costly mistake. Legal counsel should be consulted to ensure that the best type of co-ownership is selected.

Relevant Law: M.G.L. chapter 184, § § 7 and 8.

M.G.L. chapter 209, § 1.

Tenants in Common -- When the type of co-ownership is not specifically stated, by default a tenancy in common is likely to exist. Each tenant in common has a separate fractional interest in the entire property. Although each tenant in common has a separate interest in the property, each may possess and use the whole property. Tenants in common may hold unequal interest in the property but the interests held by each tenant in common is a fractional interest in the entire property (e.g. Bob owns a 25% interest in the property and Ann owns a 75% interest). Each tenant in common may freely transfer his/her interest in the property.

Tenants in common do not have the right of survivorship. Therefore, upon the death of one tenant in common, his/her interest passes via will or through the laws of intestacy to another person(s) who will then become a tenant in common with the surviving co-owner(s).

Joint Tenancy -- The most attractive feature of joint tenancy is the right of survivorship. Upon the death of one joint tenant, his/her interest immediately passes to the surviving joint tenant(s) and not to the decedent’s estate. Joint tenants hold a single unified interest in the entire property. Each joint tenant must have equal shares in the property (e.g. Bob and Ann each hold a 50% interest). Each joint tenant may occupy the entire property subject only to the rights of the other joint tenant(s).

Unlike tenants in common, joint tenancy has several requirements that must be met in order to be properly created. Massachusetts law (M.G.L. chapter 184, § 7) requires that in order for a joint tenancy to be created specific language must be included in the conveyance or devise. Such language includes that the grantees take the land: "jointly"; "as joint tenants"; "in joint tenancy"; "to them and the survivor of them"; or using other language in the instrument that it was clearly intended to create an estate in joint tenancy. However, even if such language is contained in the conveying instrument, a joint tenancy may not exist. There are four additional common law requirements (or "unities") necessary in order to create a joint tenancy. The four unities are: (1) Unity of time. The interests of the joint tenants must vest at the same time; (2) Unity of possession. The joint tenants must have undivided interests in the whole property, not divided interests in separate parts; (3) Unity of title. The Joint tenants must derive their interest by the same instrument (e.g. a deed or will); and (4) Unity of interest. Each joint tenant must have estates of the same type and same duration (e.g. some type of fee simple estate). All four unities must exist. If one unity is missing at any time during the joint tenancy, the type of co-ownership automatically changes to a tenancy in common. A joint tenancy may be created by a will or deed but may never be created by intestacy because there has to be an instrument expressing joint tenancy. A joint tenancy is freely transferable.

Tenancy by the Entirety -- This type of co-ownership is exclusively for husband and wife. Similar to joint tenancy, tenancy by the entirety provides the right of survivorship. To exist, tenancy by the entirety requires that the four unities of joint tenancy exist plus a fifth unity of marriage between the two co-owners. However, even if all five unities exists, the type of co-ownership may still be joint tenancy if the conveying instrument indicates such. Unlike joint tenancy, tenancy by the entirety does not allow one spouse to convey his/her interest to a third party. However, one spouse may convey his/her interest to the other spouse. A tenancy by the entirety may only be terminated by divorce, death, or mutual agreement by both spouses. A terminated tenancy by the entirety becomes a tenancy in common.

A: Yes. The type of co-ownership has a significant effect on level of creditor protection the co-owner-debtor receives. Tenancy in common usually provides the least amount of protection while tenancy by the entirety offers a bit more protection. For example, M.G.L. chapter 209, § 1 requires that a debtor-spouse’s creditors may not execute or seize the debtor-spouse’s property, held in tenancy by the entirety, provided that the property is the principal residence of the nondebtor-spouse. Creditors’ rights is an extremely technical area of law. Consult legal counsel in order to fully understand the implications of co-ownership.

A: It depends. Tenancy by the entirety is the only type of co-ownership that does not permit a co-owner to transfer his/her interest without the permission of the other co-owners. Any co-owner of property held in tenancy in common or joint tenancy may be freely transferred to third parties. However, if one joint tenant transfer his/her interest to a third party, the third party becomes a tenant in common with the other co-owners who remain joint tenants with each other. This occurs because the new co-owner does not fulfill the unity of title and unity of time requirements.

A: A partition is a judicial separation of property held in joint ownership by one or more individuals. Partition is used when at least one co-owner wants to terminate the property co-ownership regardless of the desires of the other co-owners. Since each co-owner has a fractional portion of the entire property, partition is necessary to properly divide the property (or its sale proceeds). Under partition, the court will either physically divide the property, or order it to be sold and the proceed distributed according to the percent interest held by each co-owner. Selling the property and dividing the proceed is call "partition by sale" and is used by the courts whenever a geographic division of the property is not feasible. The partition process involves all co-owners.

Partition is available to all but tenants by the entirety. Partition is also not available if all co-owners agree to prohibit partitions. Courts will honor this agreement for a reasonable period of time.

A: Survivorship has numerous benefits but it is not a means to avoiding probate issues. To the contrary, significant state and federal issues exist surrounding the taxation of the descendant’s interest. Choosing a type of co-ownership because it provides a right of survivorship should not be a substitute to thorough estate planning. Consult legal counsel in order to understand all the probate implications of survivorship.

A: Even though the man and woman are not legally married, they are still valid co-owners of the property. However, instead of holding the property as tenants in the entirety, they will likely hold the property as joint tenants, provided that the other four unities exist.

A: M.G.L. chapter 184, § 8 permits an individual to transfer real estate to himself jointly with another person or to himself and his spouse as tenants by the entirety. Prior to this law, a person could not convey his real property directly to himself/herself and another (possibly a spouse). If a person solely owned property and desired to hold the property with another as joint tenants or tenants by the entirety, he/she would first have to transfer his/her entire interest to a third party ( a "straw") who would then transfer the property to the original owner and his/her desired co-owner as joint tenants or tenants by the entirety. By doing this, the original owner would formally fulfill the unities of time and instrument. M.G.L. chapter 184, § 8 changed the system to allow for a direct transfer to the new co-owner.

Last Update 12/97

For more information please contact the following:

Massachusetts Association of REALTORS ® at (800) 370-LEGAL.