Understanding House Titles: Which One Is Right for You?

Buying a house is one of the biggest investments you will ever make in your life. Whether it;s your first home or your tenth, it’s important to understand the different types of house titles and the legal implications that come with each. The type of title you choose will impact how the property is owned and passed down to heirs,

What is a House Title?

A house title is an aspect that many homebuyers overlook, but they shouldn’t. Not only does it determine who owns the property legally, but it also informs potential buyers who is the owner.

A house title is a legal document that shows who owns a certain portion of property. A “deed” or “property title” is another name for it. When you purchase a home, the title is transferred to you and you become the legal owner.

The deed in real estate records the title to a property and the transfer of that title between two parties or individuals. The clerk’s office in your district or municipality usually holds a copy of all deeds for all properties under its jurisdiction.

It represents ownership rights: it is the collection of rights that determines who has a legal or equitable stake in the property. It also explains the ownership restrictions.

When it comes to titling your home, there are a few options available to you, and the optimal one relies on a variety of things, including the conditions of your family, your motives for purchasing a property, and what you want to happen to it in the event of your death.

You may or may not be able to sell the home without the permission of anyone else, depending on how the title is held.

Here are some of the most common types of house titles: joint tenancy, tenancy in common, tenants by entirety, sole ownership, community property.

Joint Tenancy

Joint tenancy is a type of property ownership in which two or more people share ownership of a property. The right of survivorship is most closely related with joint tenancy. Each owner owns an equal piece of the property, and if one owner dies, the surviving owner inherits their share (s). Every co-owner is entitled to use and enjoy the property.

Co-owners benefit from joint tenancy in a variety of ways. It does, however, have some disadvantages.

Pros:

Avoids probate: One of the most significant benefits of joint tenancy is that it avoids the probate process. When one owner dies, their portion of the property instantly goes to the surviving owner(s), bypassing probate. This can save the surviving owner(s) and their families time and money.

Easy to create: An easy approach to co-own a property is through joint tenancy. It does not necessitate any complicated legal documents or agreements, and it is extremely simple to set up.

Equal ownership: Because each owner has an equal piece of the property, it is easier to avoid disputes and conflicts. This can also ease decision-making because all owners have an equal say in any property-related decisions.

Cons:

No control over inheritance: While joint tenancy can help you avoid probate, it also means you have no say over who inherits your half of the property when you die. This can be an issue if you have specific desires for how your property should be shared after your death.

Creditors’ claims: If one of the joint tenants has outstanding debts or court judgments against them, their creditors might file a claim against their part of the property. This means that the other owner(s) may have to sell the property or use their own assets to fulfill the creditor’s claim.

Termination of joint tenancy: Joint tenancy can be terminated if one of the owners decides to sell or transfer their portion of the property. This can cause uncertainty for the remaining owner(s), especially if they lack the funds to purchase the departing owner’s portion.

Tenancy in Common

Tenancy in common is a type of property ownership in which two or more persons co-own a property, although each owner owns a separate piece of it. It allows for greater flexibility in ownership arrangements. In contrast to joint tenancy, if one owner dies, their portion of the property does not automatically pass to the other owner(s), but instead to their heirs or beneficiaries. However, it may necessitate additional legal documentation and may result in disagreements among owners over property issues.

Here are some of the common benefits and drawbacks of tenancy:

Pros:

Flexibility: Tenancy in common enables each owner to hold a varied percentage of the property. This means that each owner can have a different percentage of ownership based on their contribution to the property or financial status. It may also be for more flexible ownership arrangements, such as unequal ownership shares or ownership with non-family members.

Control over inheritance: In contrast to joint tenancy, tenancy in common allows each owner to choose who receives their portion of the property after they die. This is useful if you have specific desires about how your possessions should be transferred after your death.

Protection from creditors: With tenancy in common, each owner’s part of the property is shielded from the creditors of the other owner. This means that if one of the owners owes money or has a legal judgment against them, their creditors cannot file a claim against the other owner’s part of the property.

Cons:

Potential for conflicts: Because each owner owns a different portion of the property, decisions affecting the property may require unanimous agreement from all owners. This can lead to disagreements, especially if the owners have opposing views or intentions for the property.

No automatic transfer of ownership: In contrast to joint tenancy, if one owner dies, their portion of the property does not automatically pass to the other owner (s). This can confuse who will inherit the property and may necessitate additional legal measures to transfer ownership.

May be more complex to set up: Tenancy in common may require more legal paperwork and agreements to arrange than a joint tenancy. Working with a real estate agent is essential to ensuring that the relevant documentation is in place.

Tenants by entirety

Tenancy by entirety is a kind of property ownership available solely to married couples. It allows married couples to have an equal interest in property as well as survivorship rights, keeping their property out of probate. It is not a 50/50 split. Each spouse owns 100% of the property under TBE.

It operates by forming a single legal entity for both couples, granting them equal ownership and authority over the property.

Here are some of the advantages and disadvantages of tenancy by entirety:

Pros:

Protection from creditors: One of the most significant benefits of tenancy by entirety is that it protects against creditors. If one spouse owes money or has a legal judgment against them, their creditors cannot seize the property. For married couples, this can be an effective asset protection strategy.

Automatic transfer of ownership: When one spouse dies, their portion of the property immediately transfers to the surviving spouse. This can help to prevent probate and make the transfer of ownership easier.

Equal ownership and control: Because both spouses have equal ownership and control over the property, it can help avoid disagreements and conflicts over property decisions. Both couples have an equal say in any property matters.

Cons:

Only available to married couples: Tenancy by entirety is only accessible to married couples, therefore unmarried couples or business partners who co-own a property are out of luck.

Can be complicated to terminate: If the couple decides to divorce, terminating tenancy by entirety can be more difficult than terminating other types of ownership. Working with a real estate professional is essential to guarantee that all appropriate legal measures are done to terminate ownership and transfer ownership to one or both spouses.

No control over inheritance: Like joint tenancy, tenancy by entirety means that you can’t control who inherits your share of the property when you pass away. This can be a disadvantage if you have specific wishes for how your property should be distributed after your death.

Sole ownership

In this case, the property is owned entirely by one person. This means that the owner has complete control over the property and can make all decisions about it without seeking consent from others. Before considering whether sole ownership is the best option for you, weigh the benefits and drawbacks.

Pros:

Complete control: The most significant advantage of sole ownership is complete control over the property. You are free to make any decisions on the property without consulting with anyone else. This is useful if the owner wants to make changes to the property or utilize it in a specified manner.

Easy to transfer ownership: The simplest sort of ownership to transfer is sole ownership. The owner can sell or give away the property without involving other owners or going through lengthy legal processes.

Tax benefits: If you are a sole owner of a property, may profit from tax advantages. For example, if you use the property as your primary residence, you may be able to deduct mortgage interest and property taxes from your taxes.

Cons:

Unlimited personal liability: One of the major disadvantages of sole ownership is the owner’s unrestricted personal culpability. This means that if someone is hurt on the property or if the property is used to secure a loan and the owner is unable to repay the loan, the owner’s assets can be utilized to pay off the debt.

Limited financing options: When opposed to owners that have partners or co-owners, sole owners may have fewer financing possibilities. This is because lenders may be cautious to give big sums of money to an individual who does not have a co-signer or spouse.

No backup plan: There is no backup plan in place if the owner becomes unable to care for the property due to disability or death.

Community property

Community property works by establishing a legal entity that acknowledges the assets of a married couple as jointly owned by both spouses. To put it simply, community property means that spouses who acquire property during their marriage own it equally, 50/50. That means that if one partner dies, he or she can leave his or her portion however he or she wishes, and it is normally divided 50/50 in the event of divorce.

Community property has some definite pros and cons, which must be considered when deciding whether to opt for them together with your partners. Here are some of the benefits and drawbacks of community property:

Pros:

Equal ownership: One of the most significant benefits of community property is that it gives both couples equal ownership and control over assets. This means that both partners have an equal say in any property choices, which can help to avoid disputes and conflicts.

Tax benefits: Both couples may benefit from community property tax benefits. If one spouse dies, for example, their half of the community property will receive a step-up in basis, which might minimize the amount of capital gains taxes owed.

Protection from creditors: Community property protects from creditors. If one spouse has outstanding debts or legal judgments against them, their creditors can’t claim the community property.

Cons:

Only available to married couples: Community property is only available to married couples, thus unmarried couples or business partners that co-own a property are not in it.

Can be complicated to divide: If the couple divorces, sharing community property can be more difficult than sharing other types of property ownership. Community property might include assets obtained before the marriage or assets with separate ownership, making property division more difficult.

No control over inheritance: Community property, like other types of joint ownership, means that you have no say over who inherits your share of the property after you die.

When determining how to title your home, consider aspects such as who will own the property, how ownership will be divided, and how the property will be distributed in the event of your death. On the other hand, make sure you understand property ownership laws in your province.

Whether you’re considering joint tenancy, tenancy in common, tenants by the entirety, sole ownership, or community property, we provide valuable insights and advice to help you make an informed decision. We will also walk you through the legal paperwork and safeguard your rights and interests.