What are the
differences between some common forms of property ownership?
What is the difference between a cooperative
and a condominium?
What is the purpose of recording a deed?
What tax advantage do I get by owning real
property?
What is a quitclaim deed?
Since my spouse passed away, I want to
re-title my house so I own it jointly with my adult children. Is
this a good idea?
What is the Closing?
Q: What are the differences between common forms of
property ownership?
There are a variety of ways that one can hold title to property:
Sole Ownership:
owned entirely by one person. Words in the deed such as "Bill, a
single man" establish title as sole ownership.
Tenants in Common:
a form of co-ownership where property is owned by two or more
persons at the same time. The proportionate interests and right
to possess the property between the tenants in common need not
be equal. Upon death, the decedent's interest passes to his or
her heirs named in the will who then become new tenants in
common with the other tenants in common. Words in the deed such
as "Bill, John and Mary as tenants in common" establish tenancy
in common.
Joint Tenancy:
a form of co-ownership where property is owned by two or more
persons at the same time in equal shares. Each joint owner has
an undivided right to possess the whole property and a
proportionate right of equal ownership interest. When one joint
tenant dies, his/her interest automatically passes on to
the surviving joint tenant(s). Words in the deed such as "Bill
and Mary, as joint tenants with right of survivorship" establish
title in joint tenancy. This form of ownership is not available
in all states.
Tenancy by the Entirety:
a special form of joint tenancy when the joint tenants are
husband and wife -- with each owning one-half. Neither spouse
can sell the property without the consent of the other. Words in
the deed such as "Bill and Mary, husband and wife as tenancy in
the entirety" establish title in tenancy by the entireties.
This form of ownership is not available in all states.
Community Property:
this special form of ownership between spouses is only available
in community property states. Upon death, the decedent's
interest passes in a manner similar to tenants in common. Words
in the deed such as "Bill and Mary, husband and wife as
community property" establish community property ownership.
Trusts:
While not technically a form of ownership, you may own real
property through your Living Trust. Upon your passing, your
interest would pass to successor trustees and/or beneficiaries
you have designated in your trust.
Back to the top.
Q: What is the difference between a cooperative and a
condominium?
In a "condo" arrangement, you legally own a particular unit
in a multiple unit structure of the building. Under a
typical arrangement, you have a share and a right to use
common areas such as hallways, elevators, gardens, swimming
pools, and club house within that structure. You pay
monthly payment to an "association" for maintenance expenses
the common areas. The association is typically run like a
corporation with complaint and appeal processes to protect
individual rights of owners and to provide a mechanism for
resolving disputes within the community.
In a "co-op", the ownership structure is quite different:
you do not own your own specific unit in the building but
own stock in the corporation that actually owns the building
and all the apartments. You lease your apartment from the
corporation according to a formula based on the units
size. As a shareholder, you have a say in electing the
Board of Directors who manage the cooperative.
Back to the top.
Q: What is the purpose of recording a deed?
When you purchase real property, you receive a written
document called "the deed" which transfers the ownership of
the property from the buyer to you as the purchaser. The
deed gives you formal title in exchange usually for a
specified amount of money. The transfer of interest in real
property is not complete until the deed is delivered to
you. The deed should be recorded immediately with the
county clerk in the county where the property is located.
By recording the deed, you give notice to all future
potential buyers of that property that you now have an
ownership interest in that particular piece of real
property. Recording also tracks the chronological chain of
ownership from a series of buyers and sellers. Before you
purchase real property, a search is conducted at the county
clerks recording office to confirm that the seller (as well
as all previous sellers) has legal title to the property in
question. Title insurance typically perform this function
to determine whether any defects occurred in prior
conveyances and transfers. If so, such defects may then be
pointed out and excluded from their coverage.
Back to the top.
Q: What tax advantage do I get by owning real property?
Mortgage interest deduction: The major advantage to owning real
property comes from the deductibility of the interest of a home
mortgage or a home equity loan. In order to qualify for an
income tax deduction, the loan must be for your home or a
vacation home that is not rented to others. The deduction must
be taken as an itemized deduction in Schedule A of your federal
tax return.
Property tax deduction: real estate taxes paid to any state or
local governments are also deductible on your federal return.
Generally, the taxes must be based on the assessed value of the
real property and must be charged uniformly against all property
under the jurisdiction of the taxing authority.
Capital gains exemption: Once you sell your residence, you may
exclude up to $250,000 ($500,000 for married couples) from any
realized capital gains. In order to qualify, you must meet
certain requirements: among other things, you must have lived in
that home for at least two of the five years prior to the sale,
and not have excluded gain from the sale of another home two
years prior to the sale.
Back to the top.
Q: What is a quitclaim deed?
A quitclaim deed transfers or "releases" to the person acquiring
the property whatever present interest the grantor has in the
that property. Unlike a grant deed, a quitclaim deed carries
with it no express or implied covenants or guarantees.
Therefore, if the grantor has no interest in the property, a
quitclaim deed conveys nothing.
Back to the top.
Q: Since my spouse passed away, I want to re-title my house so I
own it jointly with my adult children. Is this a good idea?
While sharing title to property may avoid probate after your
death, naming "joint tenants" may have a number of adverse
consequences. In effect, adding a joint tenant to your home deed
means that you have now gifted a portion of that property to
those named. And when you make gifts in excess of $12,000 in
value within a calendar year to someone other than a spouse, the
IRS requires you to file a gift tax return, and in some cases
pay gift taxes. When gifting an interest in your home to anyone,
you also are endangering your own financial security. If your
new co-owners have creditors or are involved in a divorce, your
assets will be at risk. Furthermore, such a transfer may
jeopardize certain property tax and other exemptions you enjoy
as a senior, veteran, or homesteader.
A better idea is to create a Living Trust and name your children
as beneficiaries of the Trust after you die. This has the
advantage of avoiding probate, yet it gives you total control of
your house prior to transferring ownership. You can also change
beneficiaries if you so desire, and also provide for the
circumstance if one child predeceases you.
Back to the top.
Q: What is the Closing?
The closing
is a final meeting of all the parties involved in the real
estate transaction. Attorneys for buyer, seller and bank
convene with sellers and buyers to sign and officially
transfer title to the buyers. A representative of the title
insurance company will also be present to facilitate the
transfer of title. The title company is also responsible for
recording the new deed.
Before
arriving at the closing, the buyer should visit the property
to assure that everything is in working order. That means
turning on the heat and air conditioning and checking for
leaks and other problems. After the closing any problem is
the buyers responsibility. The buyer should also have all
the necessary paperwork and certified checks for the seller
and for various closing costs. Otherwise, if the mortgage,
title, homeowners insurance and other documents required by
law are not completed and brought to the closing table, the
closing may be delayed.
Back to the top.
We would also like to hear from you, so please contact us via telephone
If you require professional legal advice and
representation in