Real estate ownership can be simple or complex. Properties can be owned by one or more people or it can be owned by a another legal entity like a corporation or a school. So how does the type of ownership come into play?
The type of real estate ownership defines three main things:
- The owner’s (or owners’) legal rights and obligations
- What happens to a property if a bankruptcy occurs
- How a property can be transferred or inherited after death
Common Types of Real Estate Ownership
A single person owns the entire property. Upon death, right of ownership is determined through court.
Two or more people own equal parts of the property. If one person dies, right of ownership passes to the surviving joint tenant through the legal principal known as right of survivorship.
Tenancy in Common
Similar to joint tenancy, but two or more owners can have unequal rights to a property. One person may own 25% and another 75%. However, equal ownership can also happen. For example, in the case of a divorce, ownership can change from tenants by entirety to tenancy in common, both with 50% shares.
Unlike a joint tenancy, ownership upon death is transferred to that person’s heirs.
Tenants by Entirety
Tenants by entirety is a type of real estate ownership for married couples. Under tenants by entirety, both owners are treated as a single legal entity.
When one person dies, ownership is transferred to the surviving partner.
Additional Types Of Real Estate Ownership
A co-op is defined as a multi-unit building where each resident owns a pre-defined interest in the building. Unlike a condominium, a resident does not own the unit that they occupy. Instead, they lease the unit from the owners who are typically known as or referred to as “shareholders.”
Planned Unit Development (PUD)
PUD refers to a housing development that is not subject to standard zoning requirements for the local area. Housing developers have to receive permission from the local government in order to obtain PUD status.
The developer also has to establish guidelines for the building and its common areas, which can stipulate everything from the architectural style to the land coverage ratios and amenity requirements.
Generally speaking, land leases are a rare occurrence within the United States, however they can still be found in some rural areas. As the name suggests, when a resident owns a home on a land lease, they own the physical home, but leases the land that it stands upon.
Refers to homeowners who own a freestanding house; this term implies that the homeowner is selling the entire home, as well as the land that exists beneath it.
Refers to those homeowners who own a condo (sometimes referred to as a unit) within a condominium building. In this case, the homeowner does not own the entire building, land or common areas.
With condominium home ownership, the buyer purchases the unit in addition to an interest in the land and common areas, which will be shared with the other owners of the building.