This article discusses different types of shared real estate ownership. Remember that real estate ownership is a complicated area of law. Always consult an attorney for help understanding your property rights and before transferring property ownership.
What is real property?
Real property is land. This includes any buildings that are on that piece of land. This does not include any moveable items that you own, such as furniture or vehicles.
What is a property interest?
A property interest is an enforceable right to real estate. By enforceable, we mean something recognized by law and the courts.
There are different types of property interest. For example, you may share ownership with another person. Or you may own all of the land, while someone else owns all of the mineral rights. Not all property interests include ownership. A lien, for instance, is a property interest but is not property ownership.
Some things may look like property interests but are not. For example, if someone puts you in their will, the will does not create an enforceable property interest so long as the person is alive. The person could change their will at any time, and you would have no right to stop them.
What is probate and why is it relevant?
Probate is the court process that assigns property to heirs. It can be lengthy, costly, and is often subject to taxes and creditors.
Some types of shared ownership can help you avoid probate.
Types of Shared Property Interests
In real estate, specific terms describe different types of shared property interest. Some common types of shared interests are:
- Tenancy in Common
- Joint Tenancy with Right of Survivorship
- Community Property
- Life Estate
- Mineral Estate and Surface Estate
Tenancy in Common
Tenancy in common, also called joint tenancy in common, is the default way people share ownership in Texas. Tenants in common own property in its entirety, even if they own different shares of the property. In other words, all owners have an equal right to use and enjoy the property.
A key feature of tenancy in common is that when one owner dies, their share of the property goes to their heirs. That is different than a joint tenancy with right of survivorship, where the share would go to the other owners instead.
Property owned as a tenant in common usually has to go through probate before heirs can inherit.
Joint Tenancy with Right of Survivorship
Right of survivorship means that when one owner dies, the surviving owners get the dead owner's share. No probate is necessary. This is unlike a tenancy in common, which requires probate and which gives the ownership share to the deceased’s heirs.
As with a tenancy in common, a joint tenancy with right of survivorship gives all owners equal use of the land. Someone with one percent ownership has the same access as someone with 99 percent ownership.
Community Property and Marriage
Community property is property that either spouse acquires during marriage. Both spouses own 100 percent of community property. It does not matter who pays for it or whose name is on the deed. There are exceptions, though. Gifts and inheritance, for example, are not community property.
Money from a personal injury settlement is also not community property. However, if a spouse uses that money to buy land, the land might be community property. Similarly, if a spouse uses inheritance to buy land, that land might be community property.
Unless the couple agrees otherwise, interest in community property passes to a spouse’s heirs upon death. It does not go to the surviving spouse except to the extent they are an heir. In this, community property resembles a tenancy in common. Even if the deceased spouse names the survivor as their sole heir in a will, the property will have to go through probate.
An exception to this is when there is no will and all of the deceased’s heirs are the couple’s shared descendants. In that case, all the property interest will go to the surviving spouse. Probate will still be necessary.
To transfer community property interest to the surviving spouse without probate, couples commonly use a deed or a right of survivorship agreement. With a deed, the couple would make sure that the document describes their ownership as a joint tenancy with rights of survivorship. If the current deed does not include this language, the couple would need to create a new deed.
A right of survivorship agreement is a document where both spouses agree that their rights should go to the other upon their death. As with a deed, the agreement should be filed with the county clerk where the property exists.
One difference between creating a right to survivorship by agreement versus with a deed is that it is easy to take back the agreement. Either spouse can revoke the agreement if they wish.
A life estate gives someone the right to use the property as long as they live. This person is called the life tenant. The person who takes over the property after the life tenant dies is called the remainderman.
A life estate is created by a deed with life estate reserved, which names the life tenant and the remainderman. Life estates are often used to bypass probate.
The life tenant and the remainderman are co-owners, even while the life tenant is alive. The two just have different ownership interests. The life tenant’s interest is in the present use, while the remainderman’s interest is in the future use. The remainderman can sell or give away their future rights if they wish, even though they may not have current use of the land.
Life estates can be set up in different ways, but one should be careful. At least one Texas case suggests that if a deed gives the life tenant rights that could impact the remainderman’s future interest, such as allowing the life tenant to sell the property, then there may not actually be a true life estate. This would mean that the remainderman might not be able to transfer their future interest or use it as security for a loan.
Life Estate Example: A parent wants their children to inherit land without having to go through probate. One way the parent may do this is to grant their children a deed with life estate reserved. The parent keeps a life estate, which lets them continue to use the land throughout their life. When the parent dies, the children don’t have to do anything to take the property because they have been co-owners all along. Now that the life estate has ended, the children have full use of the land.
Deeds with life estate reserved are different from ladybird deeds and transfer on death deeds. Ladybird deeds and transfer on death deeds also avoid probate by transferring property upon death. However, unlike deeds with life estate reserved, these deeds do not take effect until the original owner dies. This means that the person who will inherit has no property interest until the death takes place.
Mineral Estates and Surface Estates
A mineral estate gives the right to mine and drill land for minerals, such as gas, oil, and ore.
A surface estate gives the right to live on, build, farm, or do pretty much anything with the land allowed by law (other than extract minerals).
Mineral rights and surface rights are often owned by different entities. For example, you may own the surface rights to the land you live on, while an oil company owns the mineral rights. It is also common for a landowner to lease mineral rights to energy and mining companies.
In Texas, surface rights are subservient to mineral rights. That means the surface rights owner must let the mineral rights owner mine and drill.
A timeshare is when multiple people have the right to use a property, each for a specific and separate time period. For example, one set week a year. Timeshares are most commonly used for vacation properties.
Most modern timeshares are lease agreements. Points-based timeshares are also common. Points-based timeshares are club-type arrangements where you get points that you can use to stay at different resort properties. Leased and points-based timeshares both give the buyer a right to use property, but not actual ownership.
Many timeshares do include property ownership, though. These are called deeded timeshares. With a deeded timeshare, every timeshare holder is an owner with the right to use the property at a designated time. This ownership interest can be sold, gifted, and inherited. It can also be taxed where applicable.
If you have questions about timeshare ownership and usage rights, consult an attorney.
An easement is the right to use someone else’s property in a limited way. If you own an easement, you do not own the property. However, you do have an enforceable right to use the property. If the property changes owners, the easement remains. Many easements are also transferrable, meaning they can be sold and inherited.
Common examples of easements:
- A utility company’s right to install pipes or power lines
- The right to travel across someone else’s property to access your own land
- A public right to use private land, such as a beach
Easements are usually mentioned in the property deed.
A lien itself is not ownership, but it is a creditor’s interest in property you own. If you put up property as a security for a loan, for example, the lender has a lien. If you fail to pay back the loan, the lien gives the creditor the right to take the property.
How can you add or remove a co-owner?
To add a co-owner, you must create a new deed. The deed must name the new owner and each current owner who will be sharing their interest. Note that you can only give co-ownership to what you own. For example, if you own 25 percent of a property and name someone as co-owner, they only share ownership of that 25 percent.
Likewise, a co-owner can give up their ownership interest by signing a deed that gives the interest to the other owners. An owner can only give up their own interest. You cannot use a deed to remove someone else’s interest without their consent.
How do you change the type of shared ownership?
One way to change the type of shared ownership is to create a new deed. The deed must name each owner and describe the type of shared ownership interest.
Those who want to change a tenancy in common to a joint tenancy with right of survivorship may sign a right of survivorship agreement instead of making a new deed. This agreement should be filed with the county clerk where the property exists, just as a deed would be.
While Texas law explicitly allows a spouse to unilaterally end a right of survivorship agreement for community property, this right does not exist in other situations. If an owner wants to end a right of survivorship agreement for land that is not community property, they must work with the other owners to do so.
Transfer on Death Deeds