Real Estate Property Ownership And Rental
Providing Guidance On Property Ownership And Rental Matters
All property is divided into two categories, real property and personal property. Real property is land and improvements attached to the land. Examples include: land, trees, fences, tile, buildings, and fixtures built into or attached to a house or building. Crops still growing may be considered “realty” by the above definition, but if ready for harvest, they may not be considered real property. All other property that is not real property is considered to be personal property.
The following sections discuss some of the terminology related to Real Property Ownership:
Types of Property Ownership
The way property is held and titled can dramatically impact property ownership during life and at death. Property ownership is the right to possess, enjoy, and dispose of real property. An owner’s interest in property may vary from complete ownership to a mere temporary right of occupancy. The nature of one’s interest in property may determine what becomes of that property upon one’s death.
When a person holds land in fee simple, it means that the person is the absolute owner with all the rights of ownership during the person’s lifetime and the right to dispose of it as the person wishes at death. If the owner does not dispose of it prior to death, the property will pass to the beneficiaries designated in the Will, by intestate succession if there is no Will, or by beneficiary designation.
A life estate means that one is entitled to the use and benefits of property for life, but that these rights cease upon death. There are certain restrictions on a person having a life estate in property. For example, a person cannot neglect or damage the property so as to greatly decrease its value.
Co-Ownership of Real Property
There are several ways for two or more people to own property together.
- Tenancy in Common. Each owner in common owns an interest in the undivided property. Individual owners need not own equal shares and need not be related. Each owner has the right to dispose of his or her share in the property without the consent of the others. If one of the owners dies, his or her share descends to his or her heirs by the statute of descent and distribution or by will. These heirs may or may not be the co-owners of the property. The interest (degree of ownership) of each owner may be seized for his or her debts. One owner may force a division of the land or sale of the entire parcel by a lawsuit, known as a partition action.
- Joint Tenancy with Right of Survivorship (JTWRS). Joint tenancy is a desirable way for two or more people to own property if an owner wishes for his or her interest to pass to the remaining owners upon death. For real property, joint tenancy ownership can be severed if one owner elects to transfer his or her interest by sale or gift.
As mentioned above, an important feature of owning property as joint tenants with rights of survivorship is this aspect of survivorship. This means if one owner dies, those remaining owners become the owner(s) of the whole property, regardless of what the decedent’s last will and testament may state. This form of ownership supersedes the provisions of a last will and testament and the laws of intestate succession if a person dies without a will.
- Tenancy by the Entirety. This is a special kind of joint tenancy in real estate, provided for in the laws of some states, which can be created only between husband and wife. This type of ownership has the survivorship component referred to above. Once this type of co-ownership has been entered into, neither the husband nor the wife can break the arrangement unless both join in a deed to convey away what they both own. Since April 4, 1985, Tenancy by the Entirety ownership deeds may not be created in Ohio. However, such deeds created before April 4, 1985, are still valid.
Transfer on Death Deed
Under Ohio law, a landowner executes a deed that states that the property will transfer to certain named beneficiaries upon the landowner’s death. This allows the property subject to a Transfer on Death Deed to avoid the probate process and the gift tax consequences of joint tenancy.
There are several requirements necessary for a valid Transfer on Death Deed. The deed must conform to the language of Section 5302.22 of the Ohio Revised Code, which contains a sample Transfer on Death Deed. The deed must specifically name the beneficiary or multiple beneficiaries of the property, and must be properly executed.
Only those beneficiaries who survive the property owner are eligible to inherit the property. Therefore, one cannot specify a class of people, such as “my children” or “my lineal descendants, per stirpes,” as can be done in a will or trust. If you have any children or grandchildren born later or there is an unexpected death, a new deed may need to be prepared. Heirs to named beneficiaries who did not survive the property owner do not hold a legal interest in the property. However, the property owner may designate in the deed “contingent beneficiaries” to take the place of a beneficiary who predeceases the property owner.
Upon the death of the property owner, the surviving beneficiaries must file an affidavit with the county recorder in the county where the land is located. The affidavit must state that the owner of record is deceased, identify the property, name all beneficiaries who survived the property owner, and name all beneficiaries who did not survive the property owner.
A death certificate must accompany the affidavit. When the county recorder accepts and records the affidavit, the property transfers to the surviving beneficiaries.
Where the Transfer on Death Deed designates multiple beneficiaries, the beneficiaries become co-owners and each takes an equal share in the property. All beneficiaries must agree to any sale, transfer, or division of the property. The beneficiaries take the property subject to any liens, encumbrances, or other rights of creditors.
A beneficiary who is named in a Transfer on Death Deed does not hold a legal interest in the property during the property owner’s lifetime. The beneficiary has no ownership rights until the property owner dies.
While the Transfer on Death Deed does away with the need for probate, a property owner should not try to avoid the use of an attorney for preparation of the deed. A deed that does not conform to the requirements of the law will be deemed invalid, and the property must then pass through the deceased’s estate.