Rachael J. Leah

Similarly, when two people purchase property, how the two people “take title” when they are buying property together defines the ownership interest each has in relation to the other. When two people purchase property, they buy the right to full ownership of the entire property (much like your landlord’s full ownership of an apartment unit). How they “take title” defines and limits what they – and creditors – can do with their ownership interest in the property.

TAKING TITLE – IN A NUTSHELL

When someone “takes title” to property, it refers to “taking an ownership interest in the property.” Among other things, an ownership interest in property describes what someone can and can’t do with the property.

Examples of what restrictions or rights that an ownership interest in property describes include things like (1) what someone can do with the property, (2) if it is sold, how much, if anything, they are entitled to receive, and (3) whether they can use the property as collateral to secure a loan.

THREE WAYS THAT PEOPLE CAN “TAKE TITLE” IN PROPERTY IN ILLINOIS

There are three ways for two people to “take title” of property together: (1) tenants in common, (2) joint tenants with right of survivorship, and (3) tenants by the entirety. As a side note, in case you were wondering, the word “tenants” here does not refer to a landlord and tenant relationship (the law likes to confuse people sometimes). Here, “tenants” generally refer to people who own an interest in property with someone else.

TENANTS IN COMMON

When two people take title to property as “tenants in common,” they each own what is referred to an undivided one-half interest in the property. In broad terms, this means that both “co-tenants” own the property, but each has the right to do certain things with their ownership interest in the property.

For example, each person has a right to transfer their interest in the property to someone else without getting permission from the other co-tenants (as always, some exceptions apply). In addition, they have the right to, for example, take out a loan and use their interest in the property as collateral.

If any of the other co-tenants rent out the property to someone else, the other co-tenants have a right to share in the profits or rents received. They also have the right to “partition” the land – in other words, if there is a dispute between the co-tenants, in some cases, a co-tenant can bring a lawsuit to have the land divided up or the value of the land determined and divvied up based on each co-tenants’ ownership interest.

Tenants in Common is the default type of ownership interest people have when they purchase property with someone else.

JOINT TENANTS WITH RIGHT OF SURVIVORSHIP

When two people “take title” to property as “joint tenants with the right of survivorship,” they each have full ownership of the property (an undivided ownership interest in the property).

Unlike tenants in common, when one joint tenant passes away, the surviving joint tenant then owns the property (takes on full ownership), and the deceased joint tenant’s interest in the property is extinguished. Joint tenants benefit from each holding full and equal ownership of the property.

With that full ownership comes the ability to sell or “encumber” (use as collateral) the interest in the property to another party without the consent of both joint tenants (i.e., one joint tenant can sell their interest without asking the other’s permission).

To take title as joint tenants in Illinois, a couple of requirements must be met. First and foremost, a joint tenancy can only be created through a written deed. This document is prepared by a real estate attorney (typically the seller’s real estate attorney) and is written proof that the seller is giving the buyers the seller’s property.

In addition to this deed requirement, there are four other conditions (referred to as the “four unities”) that must be met:

1. Unity of Time: Each joint tenant must take title at the same time (most likely at the purchase of the property).
2. Unity of Title: Each joint tenant must take title to the property in the same document (the deed)
3. Unity of Interest: Each joint tenant must receive equal ownership interest (each joint tenant has an equal, undivided ownership interest)
4. Unity of Possession: Each joint tenant must have equal rights to possess the property (i.e., everyone has the right to “possess” or enter/live on the property)

Put plainly, for a joint tenancy to be created, everybody must get the same thing, at the same time, in the same way, and have the same right to have the property.

TENANCY BY THE ENTIRETY

Tenancy by the entirety is often referred to as “joint tenancy plus marriage.” This way of taking title is reserved only for married couples. To create a tenancy by the entirety, the “Four Unities” (discussed in the numbered list above) must be met, and the tenants must be married at the time.

Interestingly, couples who were unmarried or engaged to be married at the time they bought a house together used to have to use a “middle man” to take title as tenants by the entirety after the wedding. What would happen is that the couple would buy a house together, take title as joint tenants, get married, transfer the property to a “middle man,” and then repurchase the property from the middle man and take title as tenants by the entirety.

If you are purchasing a house with your fiancé or a significant other whom you think you will later marry, talk with your real estate attorney about your options for taking title.

Tenants by the entirety have a lot of the same benefits and burdens of a joint tenancy. That said, certain laws (such as tax laws and laws about creditors) prevent creditors or the IRS from taking assets that are held in tenancy by the entirety when the underlying obligation (e.g., a loan) is only held in one person’s name.

This supports the public policy against having outside entities (like bankruptcy courts or creditors) interfering with marriages. Co-tenants cannot sell or encumber the property without the other tenant’s consent.

As with everything, certain exceptions apply. You may not be protected, for example, if you fraudulently took title as tenants by the entirety to avoid creditors being able to get at your assets.

IN CONCLUSION

“Taking title” to property is not something people often talk about or think about. Still, it’s an important choice that can impact your decisions or creditor liability later on. How you take title to property can affect your or your co-tenant’s right to sell, partition, or encumber the property, as well as what creditors may or may not be able to do if you default on a loan.

When buying a house, it’s essential to talk to a real estate attorney about the different ways to take title.