What is tenancy and what type of tenancy should I request on my deed?
This is a really important question. The choice of tenancy on your deed has major legal and tax implications and one that is often overlooked.
Below are the four types of tenancy used in Pennsylvania. These can vary by State, if you’re moving out of State be sure to address this issue with your title company prior to closing. In addition, prior to settlement on a property discuss with your attorney and or tax advisor which type of tenancy is appropriate for your situation. If a tenancy is not stated on your deed, the courts in Pennsylvania will often deem the tenancy as tenants in common.
Tenancy in Severalty/Sole Owner – This type of tenancy applies when one person is taking title to a property. The sole owner has full rights and powers to do with the property as he or she wishes.
Tenants by the Entirety – This type of tenancy is an undivided ownership held by a husband and wife, with the right to the entire Property passing to the surviving spouse upon the death of the other spouse.
Tenants in Common – This type of tenancy applies when there is co-ownership of two or more parties to a property. Each person holds an individual interest in the property, either in equal or unequal amounts. Each owner may sell or encumber his or her interest without consent of the others. Upon the death of one or more of the parties, his or her share of the property is distributed according to his or her will, if there is a will. It does not provide survivorship rights to the other person(s) in title. In the event of no will, the distribution of the property may end up in the hands of the court.
Example 1: Andy, Beth and Charles own Black Acre. Beth owns seventy (70%), Andy owners twenty percent (20%), and Charles owns ten (10%). Charles dies. Charles had a will which states that his interest should pass to his Mother, Charlene. Charlene now owns a ten percent (10%) interest in Black Acre. If Charles dies without a will, his ten percent will pass according to the laws of the State of Pennsylvania.
Example 2: Andy and Beth are married but own Black Acre with Charles. Andy and Beth own a sixty percent (60%) interest in Black Acre, which they hold as Tenants by the Entirety. Charles owns a forty percent (40%) interest in Black Acre. As between Charles and the unit made up of Andy and Beth, the parties own Black Acres as Tenants in Common, for forty percent (40%) to Charles, sixty percent (60%) to Andy and Beth jointly.
Joint Tenants – This type of co-ownership is established when two or more people purchase the property at the same time, with equal, undivided interests in the property
and upon the death of one of the parties there share in title is equally distributed among the remaining owner(s) on title.
Example: Andy, Beth and Charles own Black Acre each with a one-third (1/3) interest. If Beth dies, Andy and Charles will each own one-half (1/2) of Black Acre.