Buying a house is an exhilarating experience. If you are buying it by yourself, the ownership arrangement is easy since you will be the sole owner. However, it is likely that you will be making this purchase with a spouse, significant other, sibling, parent, friend or even an investor. You and the other owner, as co-owners, each have a financial interest in the property and a legal right to control and use the property. A co-ownership agreement, known as a tenancy, governs the terms of the owners' interests.
Each type of tenancy handles co-owners' interests and rights differently. The most common forms are joint tenancy, tenancy in common, and in many states, tenancy by the entirety. State laws vary on the type of tenancies allowed, so always check your state’s laws. Tenancy agreements can also be used for other types of co-owned property, including bank accounts, brokerage accounts and personal property such as vehicles.
A joint tenancy arrangement has very specific requirements, known as "the four unities." The co-owners' interests must be created at the same time and in the same document. Each owner must have an equal interest in the property and the right to use the entire property. Joint tenancy property is owned with a right of survivorship, so if one of you dies, the property passes to the surviving owner. The joint tenancy agreement can be broken and converted to a tenancy in common, if one of the co-owners sells or transfers his share or a creditor uses the property to satisfy a judgment against one of the co-owners.
Tenancy in Common
A tenancy in common is less restrictive than a joint tenancy. Each owner has an individual interest in the entire property, with equal or differing value. It is important that any differences in ownership be noted in the ownership documents. This type of tenancy does not include a right of survivorship, so if one of you dies, the deceased's share of the property transfers to his estate. Each individual owner has the right to sell or transfer his interest in the property. If a creditor has a judgment against one of the co-owners, the creditor can use that person's share in the property to satisfy the judgment.
Tenancy by the Entirety
In states where it is permitted, a tenancy by the entirety is only available to married couples. Similar to a joint tenancy, each spouse has an equal interest in the property and the right to the use of the entire property. This tenancy also includes a right of survivorship, so if one spouse dies, the property transfers automatically to the other spouse. However, the property can only be sold or transferred if both spouses agree and, in most states, the property can be used to satisfy a creditor's judgment only if the judgment is against both spouses.
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