Tuesday, April 16, 2013
OWNERSHIP STRUCTURES BY SAL GARCIA
Real Estate Ownership Structures
Currently the ownership of real property can be broken down into two different categories. These categories are ownership in severalty and co-ownership or also known as concurrent estate. Furthermore under concurrent estates it can be further broken down to tenancy in common, joint tenancy, tenancy by the entirety and community property. Altogether these forms of ownership are applied in today’s real estate market and will be explained in further detail below.
Ownership in severalty can be described as a single individual owning real property. This type of ownership does not include any other individual just the sole owner of the property. This type of ownership also extends to companies because they are considered as a single entity. An example of this type of ownership is John Doe purchasing a home by himself. John Doe holds ownership of his brand new modern $200,000 home and as an individual owner he can be considered as an owner in severalty. Another example could be MaxDerP Micro Systems Inc. purchase of real property for an expansion. The purchase of a new property to expand their manufacturing facility and increase production is an example of an entity purchasing real property and can be considered as ownership in severalty.
Co-ownership is ownership of more than one individual or entity it is also known as concurrent estates. This type of ownership can be broken down into four categories beginning with tenancy in common. This form of ownership is understood as a joint ownership where each party has an interest in real property. The amount of ownership varies and this ownership allows each party to sell, mortgage or will their own shares of the real property.
Joint tenancy is a form of ownership where there are more than one owner and hold the same amount of ownership such as ½ and ½ and 1/3, 1/3, 1/3. Under this form of ownership the owners do not have the power to sell, mortgage or will it individually. Ownership of the property turns into ownership in severalty after the last individual attains the right of survivorship which is pretty much outliving the other owners. An example can be owning a home with joint tenancy with MaMa and Papap and being the grandson that is listed as a joint owner. Once Mama and Papap pass away all rights are passed over as they pass away one by one. Sad example but you get the idea!
Tenancy by the entirety is the ownership of a real property between a husband and a wife. Similar to joint tenancy ownership can become ownership in severalty meaning one individual owner after survivorship. Once the husband or the wife passes away the husband or wife gains the rights to the property. They may at any time jointly agree to sell the property as well.
The last form of ownership under co-ownership is community property this form of ownership is property purchased jointly after marriage. The real property is owned jointly between both parties and can only be sold with the other parties consent.
Now that you have a better understanding of the forms of ownership of real property try to figure out which form of ownership this example can be considered as. MaxDerp Micro Systems Inc. and its parent company ItWorks Computer Systems Inc. are considering purchasing an expansion for ItWorks Computer Systems Inc. Both parties will have a share of the property MaxDerp Micro Systems will own 60% of the property and ItWorks Computer Systems will own 40% interest in the real property. At any time both parties may choose to sell their share conveniently to each other or whomever they choose to sell to at any time. What form of ownership would you consider this to be? Think about it for a second review the forms of ownership if you want and come back to it once you believe you found the answer. Okay, now that you have done that this form of ownership can be considered as….. Drum roll please. tenancy in common.
Now you have a better idea of the types of ownership in owning real property. Ownership in severalty meaning a single owner and co-ownership meaning more than one person or entity both of these forms allows buyers to purchase a home in a way that best works for the buyer or buyers. You have also learned that companies can also purchase real property because they are also considered as an entity. Co-ownership is also known as concurrent estates and is broken down into tenancy in common, joint tenancy, tenancy by the entirety and finally community property.
Source: Textbook Real Estate Analysis Environments and Activities, Ch.7 political and legal environments, Julian Diaz III, J. Andrew Hansz.