There are many ways to hold title when it comes to owning property. Understanding title, the different ways of holding title and what is involved in the title process is very important to setting up the maximum advantage when planning for property management strategies. Real property can be owned by a single owner or by multiple owners.
A person who owns property by themselves is referred to as an owner in severalty. If there is more than one owner, it is referred to as concurrent ownership and the ways of holding title would be joint tenancy, community property, community property with right to survivorship or tenancy in common. Here is the breakdown of these different ways to hold title and what they maintain:
Joint tenancy is when two or more people own a property together and have equal shares in the property. This method of holding title has automatic right to survivorship meaning when a joint tenant dies, the interest in the property continues to the remaining joint tenant(s). This method of holding title can be beneficial for long term relationships that do not want to be married but want it to be clear where the interest of real property shall go upon the death of a tenant.
Community property is a way of holding title that represents the earnings and accumulations during a marriage. This method of holding title can only be held by persons who are married and want to maintain what is not part of their community property. This would consist of property owned prior to marriage, proceeds from the sale of a property including rents or dividends, inheritance or gifts received after the marriage, property that is agreed to be separate from community property by spouses or the earnings of either party when separated and apart during the marriage. All deeds must be signed by both parties to be community property.
Community Property With Right To Survivorship
This method of holding title has many of the same features of community property but ads the benefit of the right to survivorship like that of joint tenancy. This method of title can also be held by domestic partners not just husband and wife.
Tenancy In Common
This method of holding title is for two or more persons own a property together but do not have to have equal shares. One tenant could own ninety percent while the other owns ten percent. There is no right to survivorship with this method and any interest in the property goes to heirs or devises upon death. This is the only way to hold title of real property when there are multiple partners with unequal shares.
Holding title can only be decided by the parties involved and parties should consult with an attorney or CPA for specific answers to title situations.
Click here to view the methods of holding title chart
Title insurance is set up to protect the lender, the buyer or both parties. This policy is set up for protection against forgery, property boundaries, liens against the property and misrepresentation of a parties interest. This also insures property owners that they own a marketable title and that the conditions of the property title are clear. In order to issue a title insurance policy there must be a comprehensive search to look for any and all defects pertaining to the condition of the property, liens and or conditions affecting the property etc. Once this process is completed, the title company will issue what is called a preliminary title report with details of the current status of the property. This report also includes any covenants, codes and restrictions ( CC&R's), recorded deeds of trust, agreements and easements. It is very important during the buying process to determine the ownership vesting, verification of the property address, any exceptions or restrictions affecting the property etc.
These are some of the reasons why it is extremely important to have a title insurance policy in place. A CLTA title insurance policy should cover these items:
* Forged Signatures
* False Records
* Errors With Indexing / Copying
* Mistakes With Interpretation of a Will or Legal Document
* Recorded Mistakes or Missing Documents
* Undisclosed Heirs or Missing Heirs
* Impersonation of the Real Owner
* A Deed Delivered Without The Consent Of The Grantor
* Deeds Signed By Minors, Persons of Unsound Mind or Single
Parties Who Are Actually Married
An ALTA policy should cover all the above items and these additional items:
* Unrecorded Liens And Encumbrances
* Unrecorded Easements
* Encroachments / Conflicts in Boundary Lines
* Unrecorded Rights Of Parties In Possession
It is very important to have a clear understanding of what a title insurance policy covers and what is best for the buyer. Make sure to ask questions to determine that the necessary coverage is there to provide the protection needed.
Matt Larsen & Richard Buijs
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Specializing In Bay Area Real Estate
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