A Guide to Ownership Interest in Real Estate

Ownership interest in real estate refers to the different ways people can hold, transfer, use, or profit on a piece of real property. Having ownership interest in a property means that a person is entitled to the “bundle of rights” included with the receipt of a title to a piece of real estate. These property rights include possession, control, exclusion, derivation of income, and disposition.

A person can have sole ownership interest in a property (making them the sole person holding a property title), or interest can be shared (through tenancy in common, joint tenancy, and owning partnerships). Different ownership agreements stipulate different legal rights and restrictions for certain properties, and it’s important to know what you’re entitled to when making real estate investments.

There are many different forms of real property ownership that can affect how a person can use a piece of property. Here are seven of the most common types of property ownership.

1. 1. Sole ownership: Sometimes referred to as fee simple absolute, sole ownership is the most common arrangement for residential real estate ownership. In this case, the title holder is the sole owner of the property with complete ownership rights now and indefinitely, with no restrictions on how rights can be transferred or inherited unless otherwise stipulated by law.
2. 2. Community property: Community property splits ownership of a piece of property between two spouses, with each holding equal rights regardless of income or finances. In some states, community property with the right of survivorship is also an option, where property can be transferred to the surviving spouse probate-free in the event of the other spouse’s death.
3. 3. Joint tenancy: Joint tenancy involves two or more people who are able to own property equally. Each person on the deed owns an equal share of the property, and enjoys an equal distribution of ownership rights. Joint tenancy agreements often include rights of survivorship, where property can pass directly to a surviving owner without having to go through any potential heirs of the deceased spouse.
4. 4. Tenancy in common: Similar to joint ownership, tenancy in common is when two or more people have co-ownership in real property, but not equally. For example, one tenant may have majority ownership in a home, whereas other tenants have a smaller percentage of ownership and more restrictions in their property rights.
5. 5. Tenancy by entirety: This form of ownership is reserved for married couples who own an entire property as a single entity. Ownership rights in this scenario cannot be transferred to another party without the permission of the other spouse.
6. 6. Owning trust: An owning trust bequeaths property ownership to a beneficiary through a trust, which is overseen by a third-party trustee. An irrevocable trust allows the trustee to change the agreement with permission from the trustee. In a revocable trust, the agreement can be changed by the trustee without permission from the beneficiary.
7. 7. Owning partnership: Also known as a limited liability company (LLC), an owning partnership is usually found in commercial real estate investing. This type of ownership lets investors benefit from the business itself while limiting their liability for massive financial losses or responsibilities.

Transferring property from one entity to another is typically done through a deed, which records the movement of a property title from one party to another. Depending on the type of ownership you have in real property can determine what kind of agreement you need to file to transfer said ownership (if you even can at all). Below are a few methods of transferring property ownership.

1. 1. Quitclaim deed: Quitclaim deeds—sometimes called quick claim deeds—are often used to transfer property among family members, to move properties into living trusts, and to remedy title errors. However, a quitclaim deed does not verify a grantor's ownership of the property, and in some cases (such as in clearing title errors), grantors knowingly deed property that is not theirs to sell. Quitclaim deeds also do not guarantee there are no title defects such as tax liens or easements.
2. 2. General warranty deed: A general warranty deed is the most common type of deed used to transfer fee simple ownership of a property. Unlike a quitclaim deed, a general warranty deed does confirm a grantor's ownership and a legal right to sell. It also offers covenant against encumbrances (no tax liens or easements that can be claimed by neighbors), covenant of quiet enjoyment (assurance of good title that is superior to anyone else's title claims), covenant of further assurance (stating that the seller will take whatever steps are needed to clear title if needed), and covenant of warranty forever (assuring that these assurances will endure for as long as the homeowner owns the property). Most crucially, it offers a covenant of seisin, which means it guarantees that the full title is being transferred from grantor to grantee.
3. 3. Grant deed: A grant deed is also known as a special warranty deed or a limited warranty deed. It provides all the same protections and guarantees as a general warranty deed with one key difference: It only warrants the period during which the seller owned the property. If the buyer faced a title claim from someone who had a lien on the property under an earlier owner, the buyer would have to handle the matter on their own and would have no legal recourse against the seller. However, if the buyer purchased title insurance, the insurance policy would likely handle the cost of defending the title.
4. 4. Interspousal deeds. These forms of property transfers specifically affect community property rights, and as such are for married or domestic partners only.
5. 5. Gifted property: Ownership interest in a property can be transferred by one party giving a piece of property to another as a gift, known as gifted property. This is typically done through an estate plan. If a property’s value is less than the lifetime exemption for the gift tax and estate tax, the owner can transfer it to a beneficiary as part of an estate plan. The transfer of property is considered an inheritance instead of an actual gift and will allow them to sell the property, if so desired, and pay capital gains tax based on the previous owner’s cost basis.

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