Shared Ownership

• Author: Christian Turner
• Pages: 148-227

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4. Shared Ownership

An Introduction to Co-Ownership

Having now learned how people split ownership temporally, serially serving as owners, we

will study the means by which people can own the same thing at the same time. Instead of “O to A

and then to B,” let’s consider “O to A and B.”

It isn’t difficult to imagine the kinds of issues that will arise if we recognize two or more

people as co-owners of Blackacre. What if they don’t get along, can’t agree on how to use the

property, can’t agree on maintenance or remodeling or whether to sell or lease? What if one co-

owner acts without the consent of the others? What happens when a co-owner dies? The law must

have ways to answer such questions.

As with temporally divided ownership, concurrent co-ownership can come in one of several,

fixed types. Knowing the type of co-ownership will answer many questions concerning the rights

and obligations of the co-owners (often called cotenants). These forms are: the tenancy in common, the

joint tenancy, and the tenancy by the entirety.1 Your first job when evaluating a situation involving co-

owners is to determine whether the co-owners are tenants in common, joint tenants, or tenants by

the entirety.

The major differences between the forms of co-ownership are in (1) how they are created,

(2) how the interests in the property are distributed, (3) the effect of the death of a cotenant, (4) the

alienability of interests, and (5) the availability of partition. Despite these differences, the forms of

co-ownership share approaches to dividing income and expenses among cotenants.

Basic Co-Ownership Principles

Except for certain key differences between the forms of co-ownership, the rights and

obligations of co-owners can be summarized succinctly:

Undivided interests. Each cotenant has an equal right to use and occupy the whole property.

Though the cotenants may, by informal agreement or force of habit, have their own rooms or

private areas, they may not bar each other from any part of the property. Cotenants have this right

even if they have small fractional shares. I may have only a one-quarter interest in Blackacre to your

three-quarters interest. If Blackacre were sold, we’d take the proceeds according to those shares. But,

despite your greater share, we have equal rights to possess and use all of Blackacre.

Ouster. A cotenant is ousted when forcibly ejected or barred from the property. Courts will

find constructive ouster if something about the property itself or something about the relationship

between the cotenants makes co-occupancy impossible.

No duty to pay rent. Cotenants are not obligated to pay rent to each other, even if one or more

of them are not in possession. Thus, if your cotenant has exclusive possession of Blackacre, and you

live elsewhere, you have no right to any amount of rent from your cotenant. One important

exception: an ousted cotenant is owed rent, usually calculated by taking the fair market rental value

and giving to the ousted cotenant his or her share (according to his or her fractional interest).

Rent from third parties. Cotenants are however entitled to share in rents received from third

parties. If cotenant A leases the property to X, then cotenant B is entitled to a portion of the rent

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(less expenses) according to B’s fractional share.

Expenses. Cotenants have a duty to pay their share of basic expenses, such as mortgage

payments, insurance premiums, and taxes. Many courts include among such expenses amounts

needed for basic maintenance. Other courts treat even basic maintenance like all courts treat major

improvements: no duty to share costs absent an agreement among the cotenants.

Expense borne by in-possession cotenants. Cotenants in exclusive possession must pay all the

expenses up to the value of the cotenants’ occupation. Thus, in the example above where you live

elsewhere while your cotenant enjoys living at Blackacre, while you don’t get rent, you do get the

benefit of not having to pay at least some of the expenses. If there are only two of you, each with a

one-half interest, then you only become liable for basic expenses that exceed half of the fair rental

value of Blackacre. You would bear half of the expenses that exceed such amount.

Accounting. An accounting is a cause of action to force a cotenant to pay for rents and basic

maintenance.

Partitition. An action for partitition is the means through which to seek judicial division of the

property. Partition can be either in kind, meaning that the property is physically divided with the

divided pieces distributed to the cotenants as sole owners, or by sale, after which the cotenants

receive the proceeds according to their fractional shares. Though there is a stated preference for in

kind partitition, it is often impractical and sales are common.

The Tenancy in Common

This is now the default form of co-ownership across the United States. Thus, a grant in the

form “O to A and B” will result in a transfer of the property to A and B as tenants in common. The

fractional shares granted need not be equal, and there can be more than two co-owners. Consider:

“O toA, B, and C as tenants in common, with a 1/4 undivided interest in A, a 1/4 undivided

interest in B, and a 1/2 undivided interest in C.” Each of the cotenant is free to use the whole

property, with C’s larger interest relevant only to any rent that is collected, expenses to be paid,

efforts to partition, or proceeds from a sale. E.g., while A is free to wander on and enjoy the whole

property, C would get half of the property in an in kind partition, half of the proceeds in a sale, and

half of the bill for basic expenses.

The cotenants may sell or lease their interests, granting what they have: a fractional,

undivided interest as a tenant in common. The recipient steps into the shoes of the cotenant, able to

occupy the whole, but subject to the right of the other cotenants to do the same.

The Joint Tenancy

The basic difference between a joint tenancy and a tenancy in common is the effect given to

the death of a cotenant. Joint tenants have a right of survivorship. Upon death, a joint tenant’s share is

divided equally among the surviving joint tenants. In the case of two joint tenants, the one who

outlives the other gets the whole property. It has been called the ultimate gamble.

What if the ultimate gamble ends in a “tie”? What if all cotenants die at exactly the same

time? To this morbid possibility, the oddly titled Uniform Simultaneous Death Act provides an

answer: they split the property.

These days, the intention to create a joint tenancy with right of survivorship must be clear in

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the grant. Not only that, but grants creating joint tenancies must be attended by the four unities:

Time. The interests of the joint tenants must be created at the same time.

Title. The interests must be created in the same instrument.

Interest. The interests must be identical. The tenants must have the same fractional shares.

Possession. The joint tenants must have an equal right to possess the whole. (Note that this

is no different than the rule for tenants in common.)

Only if all four of these “unities” are met will a joint tenancy with right of survivorship be

created. If the intent is lacking or if any of these unities is not met, a tenancy in common results.

A joint tenant can easily sever the joint tenancy, transforming his or her interest into a tenancy

in common. A conveyance is universally held to sever the joint tenancy. (As we will see, sometimes

lesser actions than sales will also sever.) So if A and B are joint tenants, and A conveys his interest to

X, then the joint tenancy is severed. X and B are now tenants in common. When either dies, the

decedent’s interest goes according to his or her will, not automatically to the surviving joint tenant.

Suppose that A, B, and C are joint tenants. Since they are joint tenants, we know that each

has a 1/3 undivided interest. The death of any of them will result in an equal distribution of the

decedent’s interest to the survivors, who will remain joint tenants, now each with a 1/2 undivided

interest. The last survivor will take everything.2 If C sells her interest to X, the joint tenancy with

respect to C is severed and X will take as a tenant in common with A and B. X has no right of

survivorship and, similarly, will get nothing upon the deaths of A or B. When X dies, his interest

goes according to his will. But the joint tenancy remains intact between A and B. So if A dies before

B, B will obtain A’s share, remaining a tenant in common with X, but now possessing a 2/3

undivided interest.

The Tenancy by the Entirety

You can think of the tenancy by the entirety as a more restrictive joint tenancy that only

applies to married couples. It only exists in about half the states. But where it does, it is sometimes

the default form of co-ownership for property conveyed to married couples. (Recall that the usual

default for transfers to more than one party is the tenancy in common.)

Spouses owning a piece of property in a tenancy by the entirety are essentially joint tenants,

but they may not as easily sever the right of survivorship. Typically, conversion to a tenancy in

common occurs only as a result of divorce proceedings. Further, most states require both spouses to

consent to sale or encumbrance of such property. As a result it is difficult for creditors to reach the

property to satisfy the debts of either spouse.3

Here is a chart summarizing the major differences between the forms of co-ownership:

Tenancy in common Joint tenancy Tenancy by the entirety How created Default: O to A and

B (as tenants in common). Four unities in order to create Sometimes default for married couples,

where it exists. Distribution of interests Co-Os may have differing shares All interests identical

Interests identical Right of survivorship? No Yes Yes Alienable? Yes Alienation severs yielding

tenancy in common. Only sold or burdened if both spouses agree. Partition? Yes Yes Only in

divorce