Options for Holding Real Property Title

Title to real estate is the method by which ownership is conveyed and transferred during real estate purchases and sales. There are different kinds of real estate title, and it is important to know about these differences so you can decide which method best suits your needs and situation.

What Is a Title?

The term “title” refers to a document that lists the legal owner of a piece of property. Real property includes the physical property of real estate as well as a bundle of ownership and usage rights. Title for real property must be transferred when the asset is sold, and it must be cleared for transfer to take place. Clearing a title for real property means determining that it is free of liens or encumbrances that could pose a threat to its ownership.

Real estate ownership can take several forms, with each having implications on ownership transfer, financing, collateralization, and taxation. The most common of these methods are:

Joint Tenancy

Joint tenancy occurs when two or more people hold title to real estate jointly, with equal rights to the property during their lives. If one of the partners dies, their rights of ownership pass to the surviving tenant(s) through a legal relationship known as a right of survivorship.

Tenancy In Common

With tenancy in common, two or more persons hold title to real estate jointly, with equal or unequal percentages of ownership. Each owner has the right to occupy and use the entire property. The interest percentage simply determines the financial ownership of the real estate. Unlike joint tenancy, tenants in common hold title individually for their respective portion of the property and can dispose of or encumber it at will.

Tenants by Entirety

This method can only be used when owners are legally married. Tenants by entirety 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.

Sole Ownership

Sole ownership can be characterized as ownership by an individual or entity legally capable of holding the title. The most common sole ownership is held by single men and women, and married men or women who hold property apart from their spouse, along with businesses that have a corporate structure allowing them to invest in or hold interest in real estate. 

Community Property

Community property is a form of ownership by spouses during their marriage that they intend to own together. Under community property, each spouse owns (or owes) everything equally, regardless of who earned or spent the money. In the US, nine states have community property laws, California being one. Depending on the state you reside in, real estate acquired during a common-law marriage may also be held as community property.

Other Ways to Hold Title

Entities other than individuals can hold title to real estate in its entirety:

• Corporation Ownership

Ownership in real estate can be done as a corporation, whereby the legal entity is a company owned by shareholders but regarded under the law as having an existence separate from those shareholders.

• Partnership Owners

Real estate can also be owned as a partnership. A partnership is an association of two or more people to carry on business for profit as co-owners.

• Trust Ownership

Real estate also can be owned by a trust. These legal entities own the properties and are managed by a trustee on behalf of the beneficiaries to the trust.

The methods of owning real estate are determined by state law, so individuals trying to determine the best method to acquire and hold real-property titles should conduct research for methods in their state. An excellent resource for how to best take title during a purchase is your escrow officer. In California, escrow is managed by a title company, and your escrow officer will be able to advise you on what title option is best for your particular situation when purchasing real estate.

Debbie Austin is a realtor associate with Keller Williams, Roseville and has been helping clients buy and sell property in the area for 18 years. If you have a specific real estate question you wish to see addressed, contact Debbie at debbieaustin@kw.com or debbieaustinrealty.com