5 Common Ways To Hold Title

What Is Title?

The term title refers to a document that lists the legal owner of a piece of property. Titles can be issued to depict ownership of both personal and real property. Personal property is anything that doesn't include real estate such as appliances, antiques, or artwork. Real property, on the other hand, is anything tangible like real estate. Title for real property must be transferred when the asset is sold and must be cleared for transfer to take place. This means it must be free of liens or encumbrances that could pose as a threat to its ownership.

1) Joint Tenancy

Joint tenancy is when two or more people hold title to real estate jointly, meaning, that they all own equal rights and percentages to the property throughout the duration of their life. In the case of a married couple who hold title as joint tenants, if one of them passes away, their rights of ownership transfer to the surviving partner. This is a great way to own property where everything is shared equally between spouses, partners, friends or whom ever is going to be helping acquire the property and it is agreed ahead of time that all parties will share liability and responsibility. One downside to holding title as joint tenants is that any financing options or refinancing must be approved by all parties involved in the joint tenants. This means that a husband cant choose to refinance without the spouse knowing about it, they would both have to sign the paperwork for the refinance. There are more rules associated with holding title as Joint Tenants, but for now this brief explanation will work. Be sure to call us if you would like a more thorough explanation of this.

2) Tenancy In Common (TIC)

With tenancy in common (TIC), two or more persons hold title to real estate jointly, with equal rights to enjoy the property during their lives. So all aspects of the property are shared by the people named on the title. Unlike joint tenancy, tenants in common hold title individually for their respective part of the property and can dispose of or encumber it at will. This means that if there were four owners to the property, each owner would hold 25% ownership of the property and is entitled to 25% of any profit, mineral rights, water rights, or anything else that bestows appreciation to the property. On the flip side of this, any liabilities and debts that encumber the property is split by all four owners of the property. We’ve seen this method of ownership being used in more expensive cities of Los Angeles County, obtaining financing for this type of purchase can be tricky and may require special loan programs. Although it does make owning a “piece of property” attainable, banks may not see a 25% ownership right as a worthy investment. Caution is advised when looking at buying a home as a TIC holder.

3) Tenants By Entirety (TBE)

This method of ownership can only be used if the owners are legally married. (TBE) is ownership in real estate under the assumption that the couple is one person for legal purposes. This method conveys ownership to them as one person, with title transferred to the other in entirety if one of them dies. One advantage to this method of holding title is that there is no need to take legal action in the event of one of the spouse’s death. No will is necessary, nor is it necessary to go into probate. The downside to his method of holding title is that in the event of a split between the spouses, this type of ownership automatically changes into a Tenancy in Common and ownership is divided equally between spouses. This frees the spouse to bestow or sell their share of the property at anytime.

4) Sole Ownership

Sole ownership is pretty self-explanatory. It is the possession of any real property by a man or woman whether they be single or not. In the case of a sole-ownership with a spouse, title companies will require the non-property owning spouse to sign and relinquish any rights to the property in question. This method is often used in real estate flipping. A lot of times the flipper is the one getting into and out of contracts to buyer property and it is simply more convenient to have the non-investor sign their claim to the property away so that the one doing the work can call all the shots. The downside to this is that there is potential for legal issues should the sole-owner die or become incapacitated. In this case, the surviving spouse has no claim to the property and the house can be forced to sell with no financial benefit to the surviving spouse.

5) Community Property

Community property is a way of holding real estate by a husband and wife with the intention of owning that property together. Either husband or wife can sell or transfer or will their portion of the property at anytime. This gives a sense of autonomy to the husband or wife because the need for both parties to approve of an action taken against the property unnecessary.

Conclusion

There are far more ways to hold title in the State of California, but these five are the most common and most relevant when it comes to buying a home or refinancing with the intent to change the way that title is held. In our experience, the most common method of holding title has been as joint-tenants. Investors can choose to hold title as sole owners, but if they utilize an LLC or S Corp, they can hold title under the name of their company.

If you have any questions regarding the ways in which you can hold title and what the benefits and advantages are, feel free to reach out to us. We would be happy to help and clarify any of the information in this blog post. Remember, if you’re looking for a home loan that is simple, better, and faster, call American Freedom Funding