When multiple parties purchase or otherwise obtain title to real estate, the joint owners can hold title to that real estate in different ways. The differences between how persons hold title to real estate are important. For instance, the type of title can determine how easily one person can sell their share of the real estate and what happens to their share of the real estate when they pass away. If you are unsure about how to take title to real estate in your situation, you should contact an Arizona real estate lawyer for advice.
Sole and Separate Property
One person can own real estate alone. However, suppose the person is married and owned the real estate before the marriage or acquires real estate after the marriage through a gift or inheritance. In that case, the person’s spouse must execute a disclaimer deed to allow the person to continue to hold the real estate as their sole and separate property rather than as community property.
Legally married persons can take title to the property as community property per A.R.S. § 25-211. However, each spouse has an undivided one-half interest in the community property. Therefore, one spouse cannot effectively partition the real estate by selling only their share of the property. The only way the entire property can be sold or encumbered is if both spouses agree to sign the required paperwork. See A.R.S. 25-214. However, each spouse can devise or will their one-half interest in the community property to their heirs.
Any property that either spouse obtains during their marriage is presumed to be community property unless one of the spouses obtains it via gift or inheritance. Therefore, if spouses wish to avoid this presumption, they must title the real estate in another form of co-tenancy in writing and explicitly reject holding the real estate community property.
Community Property with Right of Survivorship
This type of title to the property also requires that persons be legally married. This type of title is the same as community property in many respects. Each spouse has an undivided one-half interest in the community property, and one spouse cannot sell their share of the property without the other spouse’s consent. However, the added element of the right of survivorship allows the deceased spouse’s one-half interest in the community property to pass to the surviving spouse outside probate.
If spouses who own community property with the right of survivorship get divorced or have their marriage annulled, title to the property converts to a tenancy in common.
Joint Tenancy with Right of Survivorship
Joint tenancy with right of survivorship provides another way of holding title to real estate that allows title to pass between joint owners outside probate. However, the difference between joint tenancy with right of survivorship and community property with right of survivorship is that the joint tenants do not have to be married to hold property in this manner. If a married couple wishes to take property as joint tenants with right of survivorship, they must specifically state so in writing and reject holding the real estate as community property.
There also may be more than two joint tenants; each joint tenant holds an equal and undivided interest in the real estate. Furthermore, one joint tenant can partition the property by selling their joint interest.
Tenancy in Common
As with joint tenancy with right of survivorship, there may be more than two tenants in common holding title to real estate, and the tenants in common do not need to be married. If a married couple wishes to take property as tenants in common, they must specifically state so in writing and reject holding the real estate as community property.
Each tenant can devise or sell their share to a third party or mortgage their share. However, the tenants in common cannot encumber the real estate as a whole unless they all agree to sign paperwork to do so. Anytime a tenancy in common exists, the tenants in common should negotiate and prepare a tenants in common agreement to memorialize the parties’ understandings, obligations, benefits in regard to the shared property.
Upon the death of one tenant, their share goes to their heirs via will or intestacy laws. However, this method of holding title does not avoid the probate process.
Business entities, rather than individuals, also may hold title to real estate. These entities include general partnerships, limited partnerships, limited liability companies (LLCs), and corporations. When businesses are involved, the business should have an operating agreement, partnership agreement, or shareholder agreement to memorialize the parties rights, privileges, and responsibilities in regard to the shared property.
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