- If a property is owned "in severalty," doesn't that mean more than one person owns the property?
The answer is NO! In fact, it means that ONLY one person owns the property.
The form of ownership in which one or more individuals takes title to a property has important consequences. No one should ever purchase a property without first seeking proper counsel.
The types of "tenancies" in effect in NY State - ownership forms - addressed in this article are, "ownership in severalty," "tenancy in common," "joint tenancy," and a "tenancy by the entirety."
Ownership in severalty means one person owns the property. Think of the word "severed," separated from, rather than the word "several," meaning more than one.
Ownership in severalty means one person owns the property.
In this form of ownership the owner possesses the entire bundle of legal rights, which includes the right to use the property in a lawful manner, sell the property, transfer ownership by gift, encumber it with a mortgage, lease the property in a lawful manner, dedicate, (transfer ownership to the government), grant permission to another to use it as permitted by law, or to "devise" the property - leave it to heirs and devisees named in the owner's will.
The "individual" that owns the property in severalty may be a corporation; an "artificial person." The fact that the corporation is comprised of shareholders does not determine the form of ownership.
In a tenancy in common, the property is owned by two or more individuals. Each tenant in common shares equally in the ownership unless stated otherwise, and each owns an undivided interest in the property. Each tenant may sell its interest, and no tenant has right of survivorship. What does all of this mean as a practical matter?
Assume that Ted and Tom purchase a property as tenants in common. Assume further that the purchase price is $300,000 and that Ted puts up $200,000 and Tom puts up $100,000. It would seem that if the property is sold for $600,000 Ted would receive $400,000, two-thirds of the proceeds of the sale, and Tom $200,000, one-third of the proceeds of the sale. But the fact is that unless it is stated when the tenancy is formed that Ted owns a two-third interest and Ted a one-third interest, they would each own an equal share.
Now let's look at the meaning of each owns an undivided interest in the property. The size of the parcel is 60' x 150.' The house consists of three bedrooms, two baths, etc. If Ted has a two-third interest in the ownership and Tom one-third, does that mean Ted owns 40' x 100' and Tom owns 20' x 50'? Does Ted own two bedrooms and Tom one? No, because each owns an undivided interest in the property.
What about the right to sell their individual interest? Either Ted or Tom may sell their interest at whatever price they can get for it from a third party without the permission of the other. If either makes a profit on the sale of their interest or suffers a loss, that does not affect the other owner.
And what does no right of survivorship mean? Either Ted or Tom may leave their interest by will to whomever they so choose. Should either Ted or Tom die, the surviving owner does not automatically inherit the deceased person's interest.
When two or more people inherit property they do so as tenants in common.
In a joint tenancy which consists of two or more owners, each joint tenant owns an equal share of the ownership and an undivided interest in the property.
If Ted and Tom had purchased the property as joint tenants, each would have right of survivorship over the other's interest regardless what their wills might state.
If either Ted or Tom were to sell their interest to a third party, that party would not become a joint tenant with the other. The new party would become a tenant in common with the other.
If either Ted or Tom wanted to end the joint tenancy and the other didn't agree, the party who wanted to end it would have to bring a "suit to partition" in effect asking the court to determine the value of the property and force the sale.
A tenancy by the entirety is a special form of joint tenancy when property is owned by a husband and wife. A married couple automatically takes title as tenants by the entirety unless they choose to do otherwise; for instance, either may own the property in severalty.
Besides the fact that the owners must be husband and wife, a characteristic of a tenancy by the entirety that distinguishes it from a joint tenancy, is that neither party has the right to bring a suit to partition. In order to end a tenancy by the entirety the couple must get a divorce which automatically creates a tenancy in common.
In a subsequent article we will examine has forms of ownership may relate to capital
John A. Viteritti is currently teaching Real Estate License Continuing Education courses for Long Island University at their Riverhead campus. Classes have been scheduled through April, 2011. For further information and enrollment please contact Rosemary Malone at 631-287-8334, or firstname.lastname@example.org.
John is a St. John's University graduate, licensed Real Estate broker, lecturer, teaches real estate license classes at LIU, NYU, and Cook Maran Real Estate School, and is a well-respected consultant to the real estate industry. www.johnaviteritti.com