By Dan Barney
This past week we reviewed ownership as (A) an individual, and (B) property held as joint tenants with right of survivorship. This article will discuss a third major form of ownership, “Tenancy in Common.”
This method is actually the default ownership method in Oklahoma, i.e. if you simply title ownership as “joint ownership” the form of ownership assumed will be as a tenant in common.
• What is Tenancy in Common. Ownership as a tenant in common provides an undivided interest in the whole property, i.e., an undivided one-half, one-third, etc.
This interest stands on its own and can be bought and sold. This form of title is appropriate when two or more people intend to keep their title separate from the both during life and after death.
In practice, this ownership is somewhat theoretical in that an undivided interest provides a partial ownership of the entire property but not a total ownership of any part of the property.
Thus, an undivided one-half owner has the right to use the entire property, including the right to benefit from one-half of the rent, lease, or crop share.
When several persons own an undivided interest, the control, usage, and management can become complex and a source of conflict. This is particularly true when one of the co-tenants spends their own money to improve the property, thus benefitting the other co-tenants.
• Practical Considerations. Tenancy in common offers a benefit in that the interest is transferable and can be sold or otherwise transferred without affecting the other owners.
However, the value of a partial ownership is reduced because of the potential limitations imposed by sharing with the other owners.
An interesting problem also exists in a family situation if a husband and wife own their property as tenants in common.
If one spouse dies, his undivided interest remains as a part of his estate. The result? His estate must be probated to provide a clear transfer of title to the surviving spouse or to other heirs.
This creates an expense for the survivor that could have been avoided if another form of ownership were used.
Another consideration in co-tenancy is a debt of one of the co owners, because the death of one of the co-tenants will not terminate the ability of his creditors to file a claim against the property as a part of a probate.
Because each owner has the right to sue to split the property in a suit for Partition, the other owners may at any time face such action.
Usually real property cannot be fairly split into equal pieces and the result is the sale of the property by the court and then a split of the money after the sale. This is not a desirable option in many cases.
Consideration of such factors is an essential part of successful estate planning. It is always best to plan in advance than to react after the fact.