FORMS OF PROPERTY OWNERSHIP IN NEW JERSEY
In New Jersey there are three basic forms of ownership when there is more than
one purchaser. These are: (1) tenancy in common, (2) joint tenancy and (3) tenancy by
the entirety. The first two may be utilized in all transactions where there are multiple
purchasers but the last form of ownership is restricted to husband and wife. This article
will explain the differences between the three forms of ownership so that you may decide
which is best for you.
TENANCY IN COMMON
A tenancy in common occurs when two or more people have an equal right to
possess the property but each owner has a separate ownership interest in said property. It
is not required that each co-owner have an equal ownership but each co-owner has a right
to full possession of the property. In other words, each co-owner may occupy the entire
property even though one co-owner may have a 60% interest and the other co-owner has
a 40% interest. Another example would be if two people bought a two-family home as
tenants in common. Each co-owner would be allowed access to the entire property. In
this instance it would be wise to have a separate agreement among the co-owners
allowing each co-owner to have exclusive access to their own apartment.
What differentiates tenancy in common from other forms of co-ownership is that
there is no right of survivorship. What this means is that when one of the co-owners dies,
his interest in the property passes to his heirs, rather than his co-owner(s). The heirs of
the deceased would then hold his interest as tenants in common with the surviving coowner(s).
A tenancy in common also allows each co-owner to mortgage or sell his interest
in the property without the consent of or notice to the other co-owner(s). The sale of one
co-owner's interest to a third party results in said third party becoming a tenant in
common with the remaining co-owner(s).
Each co-owner is responsible for his share of the taxes, maintenance and repairs
of the property. If one co-owner makes all these payments then the other co-owner(s)
must reimburse him or face the prospect of having the paying co-owner place a lien on
the interests of the non-paying co-owner(s).
JOINT TENANCY
A joint tenancy occurs when two or more people have an equal right to possess
the property and have the same ownership interest in the property. In essence, co-owners
in a joint tenancy enjoy the same rights as co-owners in a tenancy in common except that
in a joint tenancy there is a right of survivorship. What this means is that if one of the coowners dies then his ownership interest is passed on to the remaining co-owner(s). The
interest of the deceased does not pass on to his heirs.
In New Jersey, the current law does not look favorably upon this right of
survivorship. Thus, if unmarried individuals purchase the property together and the deed
does not specifically indicate a joint tenancy then it is presumed that the co-owners
intended to take possession of the property as tenants in common.
Lastly, a co-owner may sell his entire interest in the property to a third party
without the consent of or notice to the other co-owners. However, the interest of the third
party would be as a tenant in common with the other joint tenant(s).
TENANCY BY THE ENTIRETY
A tenancy by the entirety occurs when a husband and wife purchase a property
together after the marriage has occurred. It is not an available form of ownership to
unmarried people. In the event of the death of one of the parties then the surviving
spouse has a right of survivorship. Each spouse has an undivided one-half interest in the
property. Another distinguishing characteristic from the other forms of ownership is that
neither spouse may sell their interest without the consent of the other. If consent is given
then either spouse may sell their interest and the buyer would then become a tenant in
common with the remaining spouse.
It is important to note that if one spouse gives consent to sell his interest there is
no effect on the remaining spouse's right of survivorship. Consider the case of John and
Mary jointly purchasing a property after getting married. Subsequently John asks Mary if
he can sell his one-half interest to Annie. Annie would be tenants in common with Mary,
who would retain her right of survivorship with John, and John would have no interest in
the property. Should John die prior to Mary then Mary would receive complete
ownership of the property and Annie would lose her interest. Should Mary die prior to
John then Annie would receive complete ownership of the property. Should Annie die
prior to either John or Mary then her interest would pass on to her heirs.
The law in New Jersey presumes that the form of ownership is a tenancy by the
entirety between a husband and wife if title to the property occurs jointly while married.
If the husband and wife prefer ownership as either tenants in common or as joint tenants
then the deed must clearly state their intention. Also, it is increasingly common these
days for a couple to purchase property prior to marriage but have the intention of getting
married in the future. In this scenario the property would be bought as either tenants in
common or as joint tenants. It is important to understand that this earlier form of
ownership will not automatically switch to a tenancy by the entirety upon marriage as this
form of ownership requires that the parties be married prior to taking title to the property.
Therefore, should the couple wish to own the property as a tenancy by the entirety after
getting married then they must convey title to themselves by deed after the marriage has
occurred.