Burt M. Polson | Napa Valley and Vallejo's Commercial Real Estate Broker

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You Can Tell a lot by the Title - Part 1

You can’t always judge a book by its cover, but the title can give you a good indication it will be  a good read. Similarly, the way owners of real estate hold title can be a good indication of how they intend to use the property and what they wish to accomplish during and at the end of their ownership.

Choosing the method of holding title can oftentimes be an an afterthought for some buyers. Investors hopefully have it dialed-in way before the title officer draws-up the closing documents, especially if there are multiple investors involved.

However, home buyers quite often do not give it much thought let alone understand the multiple methods of holding title and how it affects ownership, taxes and the inevitable disposition of the property.

Recommending the method a buyer should hold title is something a title officer, broker or agent should refrain from doing as this would be considered practicing law. The best way to proceed is to inform the buyer on their options available.

Sole ownership

A single person can hold title as sole owner--this is called ownership in severalty and gives the owner complete control. Think of it as being “severed” from other owners.

A married person could take ownership as a sole owner. He or she would do so as a married man or woman as his or her sole and separate real property.

There are no real tax advantages to owning property as a sole owner. When you die your property will need to go through probate.

Joint tenancy (with right of survivorship)

Two or more people can own a property as joint tenants. This has nothing to do with being a renter, but a “tenant” in this context is someone who owns or possesses land. This form of title can be a husband and wife or two or more unrelated individuals or entities.

This form of title can only be created upon acquisition of the property and must name all the owners. Each owner owns 100% of the property with the others.

An advantage of this form of title is if one owner dies essentially his or her share is distributed equally to the other owners by only recording a couple of documents bypassing probate.

A married couple usually would use this form of title because upon the spouse's death his or her ownership goes to the surviving spouse outside of probate.

Be aware that the law views a joint tenancy as a single ownership--if one joint tenant were to be a party to lawsuit, a judgement could affect the entire property.

One downfall to joint tenancy is that one owner can sell his or her ownership to another outside person without approval of the other joint tenants. When this occurs the joint tenancy is dissolved into a tenancy in common.

We have several additional methods of holding to discuss such as community property, tenancy in common and entities including LLCs and corporations. I look forward to explaining these to you in part 2.

Burt M. Polson, CCIM, is a local real estate broker specializing in commercial, luxury estates and wineries. Reach him at 707-254-8000, burt@acresinfo.com. Sign up for his email newsletter at BurtPolson.com.

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