Ownership Interest In A Property Explained

Key Takeaways


Whenever you purchase a piece of property (or come into ownership through a will or another inheritance instrument), you also gain what is called “ownership interest in a property“. In a nutshell, this refers to the exclusive rights you have as the property owner. In most cases, this means you can do with the property whatever you like. However, there are some additional nuances you should keep in mind before you start making major plants. Today, let’s break down exactly what ownership interest in a property means and the different rights it can grant you.

What Is Ownership Interest In A Property?

In the simplest possible terms, the ownership interest in a property is the collection of rights that either one or more owners have over that property. In general, if ownership interest is split between multiple owners, each owner’s interest is based on how much they have or are invested into the property in question. Once you have an ownership interest in a house or another property, you can use that property within reason and any legal limits that may exist.

Types Of Ownership Interest In A Property

While all ownership interest grants you certain use or profits rights for a piece of property, you can have different types of ownership interest. Let’s break down each type of ownership interest in detail, including:

  • Sole ownership

  • Break down future goals into short and long term.

  • Joint tenancy

  • Tenancy by entirety

  • Tenancy in common

  • Owning trust

  • Owning partnership or LLC

  • Owning corporation


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ownership interest

Sole Ownership

Sole ownership is a type of ownership interest in which one person has full ownership of a piece of real estate property. As a result, the property owner can make decisions without needing to deliberate with other people. They can decide to use, sell, or modify the asset depending on their funds and goals. But sole ownership does make property transfer a little more difficult. For example, if there are several legitimate claims for a piece of property, that property may need to go through the probate legal process after the owner dies or passes on their estate. This can be both time-consuming and expensive.

Joint Tenancy

Joint tenancy ownership interest is a common type of property ownership, particularly between spouses or family members. As its name suggests, a joint tenancy means that two people share an equal amount of the investment in a piece of property. As a result, they have equal rights for property use and profits or income resulting from any sales or modifications. The biggest difference between a joint tenancy and a sole ownership interest is that a joint tenancy requires both owners to be agreed before any decisions can be made. Furthermore, both tenants are legally and financially on the hook for the debts of the other. Most joint tenants combine their legal ownership with a clause that merges the joint tenancy with the right of sole survivorship, which gives the surviving owner in a partnership the sole interest in the property if one of them dies.

Tenancy by Entirety

A tenancy by entirety is a special type of ownership interest that can only be used by spouses. Both spouses jointly own the property with such an interest, but they act as a single legal entity together. Both spouses must agree to sell the property, and tenancy by entirety comes with the right of sole survivorship built-in by default.

Tenancy in Common

A tenancy in common is a type of ownership interest where ownership of property is split between at least two parties simultaneously. As opposed to a joint tenancy (where both partners own the same amount of the property or have an equal partnership), a tenancy in common allows different owners to own different percentages of the property in question. For example, one owner could own 50% of the property, another 25%, another 10%, and so on. Furthermore, this type of interest does not come with the right of sole survivorship by default. If an owner in the tenancy in common passes, their ownership of the property is passed to one of their heirs.

Owning Trust

An owning trust appoints a trustee to manage any applicable real estate assets; the trustee can be an organization or an individual. In most cases, owning trusts are either:

  • Irrevocable trusts, which only allowed changes to be made to the trust if the beneficiary gives permission

  • Revocable trusts, which let trustees make changes to real estate whatever they like

In either case, an owning trust allows real estate to be protected and technically owned by one person but overseen by another individual who may be of sounder mind or greater financial knowledge than the owner themselves.

Owning Partnership (LLC)

An owning partnership is mostly used for commercial real estate. This ownership interest type allows investors to purchase and own property through an LLC or limited liability company. Therefore, the investors’ liability is limited in the event of debts or bankruptcy. This type of interest comes with a few tax benefits, such as pass-through taxation rights.

Owning Corporation

Similar to an owning partnership, an owning corporation is an ownership interest where multiple investors purchase property through a corporation. Unlike an LLC owning partnership, an owning corporation does not limit liability for the owners or investors. So if someone sues the corporation in question, the property can be seized or sold off to pay for debts.

what is ownership interest

Rights Within Ownership Interest In A Property

In any case, an ownership interest gives you certain legal rights regarding the attached property or real estate. In most cases, homeowners can enjoy all of the below rights, whereas investors in joint arrangements may only be granted some rights depending on their level of investment. Legal owners of property are generally afforded the following rights:

  • Right of possession, which means that the titleholder legally owns the property in question

  • Right of control, which says that titleholders have the right to use their property however they please so long as it is not in conflict with the law or local governing bodies like condo boards or homeowners associations

  • Right of exclusion, which is the right to limit who can enter the property

  • Right of enjoyment, which grants the right to engage in pleasurable activities while on the property provided they do not conflict with other laws

  • Right of disposition includes the rights to sell the property whenever the titleholder(s) see fit. This right is only fully realized for homeowners once they own the property and no longer have to pay off their mortgage loan

How to Transfer Ownership Interest In A Property

You can transfer the ownership interest of the property in a few different ways, typically through quitclaim deeds or grant deeds. Whenever you want to transfer your ownership interest for a property to another person, you should work with a title company or local real estate attorney, as they can tell you which documents you need to pick up and help you navigate the complex legal processes of your area.

Summary

Ownership interest in a property comes in a few different forms. But all types of ownership interest essentially grant one or more owners the exclusive rights to use, enjoy, and/or sell the property they own as they please. Understanding your property rights is vital so you can live in, develop, or profit from your property to the fullest.


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