When two or more residents jointly own the same property, they engage in a legal relationship known as co-tenancy property ownership. Also referred to as vesting, co-tenancy carries with it several options for determining the percentage of a property one of the co-tenants owns, as well as what happens to the property in case one of the co-tenants dies. In the State of Iowa, the two forms of co-tenancy relationships go by the names Tenants in Common and Joint Tenancy with Rights of Survivorship.
Although the two legal forms of dual tenancy ownership have similar characteristics, there are some important distinctions that determine the percentage of a property owned by each of the residents of the property. In addition, a major difference between a Tenants in Common and Tenants with Rights of Survivorship relationship is how the State of Iowa decides what happens to a property when one of the co-owners passes away.
Tenants In Common
Two or more owners can own equal or unequal shares in a Tenants in Common property ownership arrangement. Whether the shares held are equal or unequal in terms of financial leverage, the total shares must equal 100 percent. Tenants in Common ownership contracts establish that one owner’s shares are distinct from the shares held by a second owner in a property. This means one owner has the legal right to transfer his or her shares to another owner, without having to gain consent from the other owners of the property. If an owner dies, the shares held by the owner transfer to the person stated in his or her will. Otherwise, the surviving heirs receive the property ownership shares. Tenants in common own a percentage of the entire property – this is different from one person owning the north half of the property and the other owning the south half.
Joint Tenancy with Rights of Survivorship
In a Joint Tenancy with Rights of Survivorship property ownership agreement, each party owns an equal share of the property. This is a common property ownership arrangement for married couples. If one of the two parties wants to transfer ownership of a property, he or she must gain the consent of the other party to the property ownership contract. The transfer of property share ownership requires the active participation of the second owner, who must sign the deed. Rights of survivorship, on the other hand, operate in such a way that when one of the owners passes away, their share automatically transfers to the surviving owner (joint tenant).
The right of survivorship takes legal precedence over any language written into a will or an inheritance document. You can learn more about what happens if you pass away without a Will here.
The Bottom Line
When the time comes to purchase a property with your spouse, parents, or possibly siblings, you have to decide how you want to title the property. If you opt for Joint Tenancy with Rights of Survivorship vesting, be aware that you must gain the consent of ALL joint tenants to sell the property in the future. The primary benefit of joint tenancy is the automatic transfer of the property to the surviving joint tenants upon the death of another joint tenant (in case of a married couple, the property passes to the wife upon the passing of her husband).
However, if you choose to move forward as Tenants in Common, each separate owner (tenant in common) may sell their “undivided partial interest” as they wish, without the other owner’s consent. It is more common to see this method of ownership used when passing partial interests of property to multiple heirs through probating a will.
There are other methods in which an entity (trust, limited liability company, corporation, etc.) can take title to real estate, and we will save that discussion for a future blog post!
Regardless of your preferred property ownership type, it’s essential to actively engage a licensed Iowa real estate attorney, such as Danilson Law, to stay informed about the latest changes to Iowa real estate laws.
