TITLE TO REAL ESTATE OPTIONS

When more than one person owns title to a piece of real property, the law of the State of Illinois allows for the title to be held between the owners in three ways: as tenants in common, as joint tenants with the right of survivorship, or as tenants by the entirety.

Most of the time, owners may choose the manner in which they hold title and their decision can be changed in the future if the owners agree to such a change and it does not violate any laws. Each manner of holding title will result in different ways in which the property will transfer upon the death of an owner, and will also determine the rights and abilities of outside creditors to attach the property.

The most basic form of title is as “tenants in common”. In Illinois, if no manner of title is stated, co-ownership is presumed to be as tenants in common by default. Owners of property as “tenants in common” own an undivided fractional interest in property. Even though the owners may own unequal shares of property, they still can each use the entire property. The physical property is not divided. This is known as unity of possession.

“Tenants in common” owners each hold separate ownership interests which can be sold, conveyed, or transferred without the consent of the other owners. When one of the owners dies, the deceased’s share of land is transferred by their will or by the intestacy statute and the deceased owner’s heirs or legatees will become the new owners of that share.

Land held as “tenants in common” may also be “partitioned” or “encumbered” (have liens placed against the property) by creditors.

The second option for holding title is as “joint tenants with right of survivorship”. This form of ownership may be attained by satisfying the legal requirements of the “four unities” of ownership. These “four unities” are time (all owners must take title at the same time), title (all owners must take title by the same document), interest (all owners must have an equal interest), and possession (all owners have an undivided possession right).

Similar to “tenancy in common”, all owners have an undivided interest in the whole property and can use the entire property. The main difference from tenancy in common is that there is a unity of ownership. Upon the death of one of the owners, any remaining owners will take the rights of the deceased owner. The remaining owners are assured no new persons will have title to their land. The property will pass to the surviving owners outside of the probate process. In fact, even if a deceased owner’s will designates that the property pass to some other individual, that request will not be satisfied.

A joint tenancy may only be created expressly by a deed. In Illinois, the joint tenancy relationship can be dissolved at any time upon the conveyance of a joint tenants interest to himself or any other person regardless of the consent of the co-owners. The joint tenancy of any other co-owners, however, remains unaffected.

Property held in Joint Tenancy may be partitioned, sold, or encumbered without the consent of the other owners.

The third option, “tenancy by the entirety” is only available to married couples and provides extra protection to marital property.  It is similar to “joint tenancy”, but also requires the owners to be married to each other at the time of the property transfer. The form requires the “four unities” of joint possession plus a fifth: marriage.

This manner of holding title has all the benefits of joint tenancy in that the survivor of the first owner to die will take title to the entire property outside of probate, and it also includes the additional benefit of protecting the property from some creditors. A home held as “tenants by the entirety” may only be reached by creditors of joint debts of a husband and wife. In the case of non-joint debts of a husband and wife, the property may not be partitioned, sold, or encumbered without the permission of both spouses. Additionally, neither spouse may convey their half interest without the consent of the other.

The courts of the State of Illinois have determined that specific terminology must be employed to create this form of tenancy. The deed must indicate that the parties are married and specify the exact words creating the tenancy.

A “tenancy by the entirety” may be terminated by a court ordered sale to satisfy a joint debt of husband and wife, by the death of either co-owner, by the divorce of the co-owners or by the agreement of the co-owners.

In many cases, home buyers do not even consider the manner in which they would like to hold title. It is, however, very important as the method of holding title has serious estate planning and tax implications. Most home buyers and property owners should review the manner in which they hold title to their property to determine if the title is held in the most appropriate manner. Making a change can be as simple as preparing and recording a properly drawn and executed deed.

Please contact Giorgi & Bonomo, LLC with any questions regarding title or to request deed changes.  We are happy to help!

https://www.gb-lawyer.com/contact/

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