Sole and Spearate Ownership of Real Estate - Tenancy in Severalty
A tenancy is best defined as the type of real estate ownership one has, or the
way the interest in the property is held or vested. Title to real property is sometimes held by one natural person or legal entity; this form of ownership is called "tenancy in severalty". It may seem counter-intuitive to refer to sole ownership using the word "several", but here it is used in a legal sense, and means that the interest in the property is severed or separate from other interests. A "natural person" means a real, live human being, as distinguished
from a legal entity (an "artificial person") such as a corporation. A legal
entity is considered one person and is legally permitted to own property in
severalty, even though ownership decisions may be made by a group of people, such as a board of directors.
In legal terms, a "single" person is one that has never been married, while an "unmarried" person is one who has been married but is no longer. Tenancy in severalty by single or unmarried persons is straightforward: the holder has all the rights of ownership, and has sole discretion over the use, enjoyment, possession, and disposition (sale or other transfer) of the property. When property is owned in severalty by married persons, however, the question of how ownership is vested becomes more complicated. This is due to the fact that different states have different laws governing the ownership of property by married couples. Some states have "community property" rights, meaning that property acquired after the marriage belongs to both husband and wife equally, with each having a 50% interest. Other states use "tenancy by the entirety", in which both husband and wife own an equal, undivided interest in any property acquired after the marriage began.
Whatever type of joint ownership by husband and wife is in effect, certain general rules apply. First, any property owned in severalty by either spouse prior to the marriage remains the sole and separate property of that spouse. Second, any property that was willed to a spouse either prior to or during the marriage is also considered to be owned in severalty by that spouse. Likewise, any property received as a gift by a spouse prior to or during the marriage remains the sole and separate property of that spouse. Next, any court award or judgment received individually by either spouse during the marriage is owned in severalty by that spouse. Finally, any income earned from property held in severalty by either spouse belongs solely to the spouse who owns that property.
An interesting point with regard to tenancies by the entirety is that even though one spouse may own property in severalty and therefore has sole discretion over its disposition, the signatures of both spouses may be required in order to convey that property to another person. This is due to the very nature of this type of ownership, which is intended to provide a continued means of support for the surviving spouse. A tenancy by the entirety creates a legal life estate that supersedes other legal interests in the property, even in property held in severalty. This means that the surviving spouse, upon the death of the other spouse, may in fact claim at least partial ownership of property that was held in severalty by the deceased spouse. This situation does not occur in community property states, although one spouse may have the other sign a "disclaimer deed", which disavows spousal interest in property held in severalty.
Of course, marriage to many is about sharing and equal partnership, so one spouse may wish to convert sole and separate property to marital property owned by both. This is relatively easy in community property states, where it is legal for one spouse to deed property owned in severalty to both spouses. In states that practice tenancy by the entirety, it is slightly more complex. In many of these states, it is illegal for one to deed property to oneself, so a "straw party" is necessary. This party, which may be an acquaintance of the married couple but is more often a professional (attorney) or entity (title company) that provides the service for a fee, accepts the transferred property then deeds it back to both spouses, thus converting sole and separate property into marital property owned by both spouses. In an upcoming issue, we will discuss in more detail the creation and termination of property held jointly by two or more parties, including marital property.
Added: Wed Sep 17 2008