Co-Ownership: Is this the best Choice for you? (Part 1 of a 3 part series)
When two or more parties have agreed to purchase a property together, they must decide how the title to the property will be held. Determining how you will establish this title must be an informed decision. This becomes especially important in the case of shared family-owned real estate and business real estate.
There are three types of tenancy for a shared property in Massachusetts. We will be reviewing these in a brief series over the next several weeks.
These are the three tenancy relationships common to owners within the Massachusetts.
- Tenancy in Common
- Joint Tenancy
- Tenants by the Entirety
The first of this series will be dedicated to the “Tenancy in Common”, arrangement, most common to unmarried co-owners.
Tenancy in Common
Tenancy in common involves the commitment that two or more people have over a shared property. The intent in setting up a Tenancy in common is for the parties to own property together, but if one tenant owner dies, his or her share of the property passes to his or her estate or designated beneficiaries. In Massachusetts, tenancy in common is the default form of title taken by unmarried parties.
DISTRIBUTION AFTER DEATH: With Tenancy in Common, should an owner tenant die, the surviving tenant does not automatically hold “the right of survivorship”. The ownership stake will be passed down to the tenant’s estate or beneficiaries. In most cases like this, the beneficiaries would take ownership of the property. In some cases, the “beneficiary” may be the surviving owner tenant.
THE RIGHT TO SELL: Tenancy in common allows either party to sell their share at any time, without risking the end of the agreement all together.
DESIGNATES A PROPORTION OF OWNERSHIP: Tenancy in common allows for specification that each tenant has a different degree of ownership shares and interests over the property.
Termination of a Tenancy in Common: A Tenancy in Common can be terminated through the following means:
If there are opposing interests, or ideas about how to use or sell the property, the tenants must come to a joint agreement to move on.
- An owner/tenant in this situation surrenders possession by agreement, or a tenant buyout agreement, which is when one or more co-tenants buys out the others.
If they cannot come to a mutual agreement, then a partition action may take place. The court will divide the property among the TIC members
Partitioning the Property:
- If the co-tenants cannot work together, it may be necessary to divide the property by court action through a partition in kind . In this case, the court may determine a partition equitable to a fraction equal to each owner’s share. This may be followed by a partition of sale and results in the sale of the entire property and the proceeds are distributed amongst the owners.
- Partition by sale: In partition by sale, the court forces the sale of the property and each co-tenant receives their share of the profits.
- A partition act allowing an heir to sell the property, is filed. In this case, tenants can choose to arrange a joint tenancy if they wish to do so.
A third way to terminate your tenancy in common is through Ouster. Each state has different requirements about what constitutes ouster. Ousting a co-tenant will terminate the tenancy in common. However, if you choose this route, expect to be sued by your co-tenants for their portion of the fair rental value, or for judicial partition. In rare cases, an ouster can result in ownership of the entire property if the elements of adverse possession are met.
More On Tenancy Relationships For Melrose MA Property Purchases
It is important to understand the unique tenancy relationships for Melrose MA property purchases. Each bestows different rights to co-owners and heirs. If you are unsure of which type of tenancy to select for your property purchase, contact the Tramontozzi Law Offices at781-665-0099 for advice and guidance.