QUESTION: My husband and I are about to purchase a house. We are concerned about what would happen to the house if one of us dies. Is there a certain way to take title to the property in order to protect our interests? Also, are there different types of Deeds which we should know about?
ANSWER: There are several ways to take title to property. When more than one person takes title to property, this is known as a “concurrent ownership interest.” Each co-owner has an ownership interest in the entire (or whole parcel of) property. The three forms of concurrent ownership are Joint Tenants, Tenants in Common, and Tenants by the Entirety.
1. Joint Tenants
A Joint Tenancy exists whenever two or more persons own an entire, undivided interest in a particular piece of property. The distinguishing characteristic of a Joint Tenancy is the right of survivorship. Upon the death of one of the Joint Tenants, the surviving Joint Tenant continues to retain an undivided ownership interest in the property. If there is more than one surviving Joint Tenant, the remaining Joint Tenants continue as co-owners of the property until there is only one last survivor. The last survivor then has sole ownership in the entire property. The law will not imply a Joint Tenancy. In fact, when the intent to create a Joint Tenancy is not clearly expressed, the courts in Maryland may hold that the conveyance created is a Tenancy in Common (see discussion below). Therefore, for the purchasers of property wishing to obtain title to property with the abovementioned rights, it is suggested that the purchasers expressly state that they wish to obtain title as “Joint Tenants with the Right of Survivorship,” and such words must be set forth in the Deed.
Generally, a Joint Tenant may sever his or her undivided ownership in the property by conveying that interest to a third party. Thereafter, the new owner holds title to the property as a Tenant in Common with the remaining Joint Tenants. This means that the new owner has no right of survivorship. For example, if A, B and C own title as Joint Tenants with the Right of Survivorship, and A conveys his interest to X, the Joint Tenancy is severed. Thereafter, B and C still hold an undivided one-third interest each as Joint Tenants with the Right of Survivorship. X will own an undivided one-third interest as a Tenant in Common with B and C. If B dies, C then owns two-thirds of the property as a Tenant in Common with X, and X still owns a one-third interest.
2. Tenants in Common
The key distinguishing factor between a Tenancy in Common and Joint Tenants with Right of Survivorship is that a Tenancy in Common is concurrent ownership with no right of survivorship. Each individual owner has a distinct, proportionate, undivided interest in the property, which is freely transferable by inheritance and is subject to the claims of the creditors of the particular owners. Tenants in Common do not necessarily need to own equal undivided interests in the property. Although each owner is entitled to possession of the whole property, Tenants in Common may acquire their interests at different times by different instruments and may have undivided interests. Unless otherwise stated, however, each Tenant in Common is presumed to take an equal share in the property. For example, A and B own a parcel of property as Tenants in Common. A has an undivided forty percent (40%) ownership interest, and B has an undivided sixty percent (60%) ownership interest. A still has the right to possess and enjoy the property in a manner equal to that of B, so long as the concurrent ownership lasts. However, either concurrent owner may, at any time, and without the consent of the other, freely sell, assign, or convey his ownership interest.
3. Tenants by the Entirety
Ownership as Tenants by the Entirety is similar to a Joint Tenancy with Right of Survivorship, subject to three significant differences. First, Tenants by the Entirety must be married. Second, neither spouse can sever his or her ownership interest in the property without the consent of the other. In other words, an attempted conveyance to a third party by one spouse alone will not eliminate the right of survivorship, as such conveyance would be invalid. This means that one spouse cannot sell or mortgage any part of the property without the consent of the other spouse. Finally, with the exception of certain Federal tax liens, the ownership interest of one Tenant by the Entirety cannot be reached by the other spouse’s individual creditors.
The only ways to terminate the co-ownership interest of Tenants by the Entirety are by the death of either spouse, divorce (in which case the parties become owners as Tenants in Common), or mutual agreement.
Regarding your second question, there are three basic types of Deeds conveying property.
1. Special Warranty Deed
With a Special Warranty Deed, the grantor warrants that he did nothing personally during his ownership of the property which would create a defect in the title to the property. This is the type of Deed used most often in Maryland. Because the warranty is limited in time, the need for title insurance becomes more significant in Maryland, where special warranty deeds are the norm.
2. General Warranty Deed
The grantor, giving a General Warranty Deed, warrants that the title is free of any defects, either prior to his ownership of the property or arising out of his ownership in the property. The grantor warrants to the purchaser that the title to the property is good from the beginning of time until the purchaser takes title.
3. Quitclaim Deed
A quitclaim deed transfers to the purchaser any title which the seller/grantor has. This Deed gives no assurances (no covenants or warranties) that the title is good. The seller is merely giving to the purchaser whatever title the seller has, if any. This type of Deed is usually used to cure a title defect or convey title when the grantor is unsure as to the validity of title.