Real Property Tenancies
Real Property Tenancies
When purchasing real property, it is extremely important to know which type of ownership will be best for you and your situation. Whether purchasing as an individual or together with other persons or entities, the type of ownership you elect will affect the transferability and inheritability of the property. The fact is that most people are not aware of the type of ownership interests.
When a single individual purchases real estate in “fee simple,” they hold a 100% ownership interest in the land. The sole owner is free to do anything with the property that is within the law and without anyone else’s permission. When one or more persons own property together, a “tenancy” situation is created where all persons have a possessory right in the property and alienation may be restricted.
There are three widely recognized tenancies in Florida: tenancy in common (TIC), joint tenancy with right of survivorship, and tenancy by the entirety.
Tenants in Common
The tenancy in common is the default tenancy when a property is owned by more than one person and the tenancy situation is not specific or is ambiguous. A tenancy in common occurs when concurrent owners own a fractional interest in the property which varies according to ownership. For example, if four people own a property, then each has a 25% ownership interest in the entire property unless otherwise specified.
At the death of one of the tenants in common, his or her interest is able to be inherited by the heirs of the tenant who passed away. The negative here is that the property now has to pass through probate.
Joint Tenants with Right of Survivorship
The joint tenant with right of survivorship has all the same features as the tenancy in common except that all joint tenants must have the same equal percentage interest in the real property and when one joint tenant passes away, his or her interest in the real property will automatically pass to the survivor joint tenants by operation of law. The main difference between tenants in common and joint tenants with right of survivorship is that your heirs or beneficiaries under your will, are not able to inherit your property rights unless they are one of the other joint tenants.
To have the tenancy pass by operation of law, all there is to do is record the death certificate of the joint tenant who passes away at the Property Appraisal’s office in the county where the real property is located.
Since tenancy in common is the default tenancy, creating a joint tenancy with right of survivorship requires more verbiage as courts are reluctant to enforce ambiguous language to right of survivorship indications. This form of holding title is advantageous to avoiding probate, unless you want your children to inherit your interest. If you want your children to inherit your interest, you must make sure that either they are listed as the other joint tenants or that you are the last survivor of the joint tenants.
Tenancy by the Entireties
Tenancy by entirety in Florida
A tenancy by the entireties has all the same features as joint tenants with right of survivorship except that the tenancy by the entireties can only be created my married couples. A tenancy by the entireties is presumed when married couples are listed under the real estate title as “husband and wife.”
Upon the death of one of the spouses, the real estate interest passes automatically to the surviving spouse by operation of law, similar to how the interest passes in joint tenants with right of survivorship.
It is essential to consider proper estate planning after the death of the first spouse because probate will need to be done at the death of the surviving spouse to transfer title. Consider using a lady bird deed instead to avoid this issue.