Taking Title to Your New Home

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In some states, a lawyer is required to handle the real estate closing.
Title companies and real estate agents cannot conduct closings, or even
give their clients advice about them, as that would be practicing law
without a license. In many other states, attorneys are not usually involved
in residential property sales, and a title or escrow company handles the
entire closing process.
Taking Title to Your New Home
When you buy your home with your partner, you must decide how you
will own the property, or in real estate talk, how you “take title.” This
decision has important consequences, especially for estate planning. You
have four choices:
• Only one person holds title.
• Both of you hold title as “joint tenants.”
• Both of you hold title as “tenants-in-common.”
• If you are married or legally partnered, both of you hold title as
“married persons” “community property,” or “tenancy by the
entirety.”
Title in One Person’s Name
As we’ve mentioned earlier, sometimes a couple is tempted to put only
one name on the deed to save on taxes or avoid one partner’s creditors.
The tax savings are attractive if one of you has a lot of income and the
other makes very little money; the high-income person takes all the house
tax deductions. But in general, this is a bad strategy. If only one person’s
name is on the title, that person is the sole owner unless you make a
separate contract that says otherwise. And if the person whose name is on
the deed (and who is therefore the presumed sole owner) sells the house
and pockets the money or dies without making provisions for the other
partner, that partner may be out of luck.
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Caution
Do not let a mortgage broker persuade you that a second owner can
be easily added to the title later on. It is possible, but in many states it can be
difficult and expensive, and can sometimes involve paying transfer or gift taxes.
If you do have compelling reasons to keep one partner’s name off the
deed, but want to protect that partner’s share of the house ownership,
have a lawyer draft a contract that spells out the rights of both owners—
after you make sure that such a contract is valid in your state. If it isn’t,
the partner who is not on the title may be considered a creditor rather
than a co-owner.
Joint Tenancy
Joint tenancy means you share property ownership equally, and that each
of you owns and has the right to use the entire property. Joint tenancy
also comes with something called a “right of survivorship.” In fact, the
deed sometimes reads “joint tenancy with right of survivorship.” This
means that if one joint tenant dies, the other one automatically receives
the deceased person’s share, even if there’s a will to the contrary. And
when joint tenancy property passes to the other joint tenant at death,
there’s no need for any probate proceedings.
Caution
Each joint tenant has the right to sell his or her interest, regardless
of whether the other joint tenant agrees—or is even aware of the sale. If one
joint tenant sells his or her share or transfers it to a living trust, the sale or transfer
ends the joint tenancy, and a tenancy-in-common is created between the new
owner (or the trust) and the other original owner. (See below for the definition of
tenants-in-common.)
If you and your partner own unequal shares in the house, joint tenancy
isn’t the appropriate way to hold title—it’s only for when each joint tenant
owns the same portion. This means that you and your partner could put
a house you owned 50-50 in joint tenancy or that three people could have
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joint tenancy with each owning one-third of a property. If you own 65%
of a house, however, and your lover owns 35%, joint tenancy won’t work.
Joint tenancy can also create some serious adverse tax consequences for
high-asset couples. If that’s a concern for you, see a tax specialist before
making a final decision.
If one of you contributed more to the down payment, you can equalize
things even if you hold title as joint tenants and own the property
equally. You would do this by establishing a dollar amount that the
higher contributor would receive as reimbursement, instead of by giving
that person a greater ownership interest. (You could do this through a
promissory note, through the other partner paying more than half of the
expenses, or, in some states, simply by signing a written agreement setting
forth the reimbursement details.) But again, if you want to own the
property in other than equal shares, use tenancy-in-common.
EXAMPLE: Tom and Liam decide to buy a house together; they want
to own it equally as joint tenants and pay the monthly expenses
equally, but they’ve kept their savings separate so far and they’ve
each saved different amounts. Tom is going to contribute $10,000
toward the $40,000 down payment, and Liam is going to contribute
$30,000. They’ve decided to honor their unequal contributions by
Tom committing to pay Liam $10,000 (so that they each will have
contributed an equal $20,000), either over time as Tom can afford it,
or out of Tom’s share of the proceeds of the sale if and when they sell
the house.
Tom and Liam should put this commitment in writing as part of
their co-ownership agreement. They will own the property equally as
joint tenants, but Tom will have a debt to Liam.
We discourage partners from using a recorded mortgage to secure a
loan between partners, primarily because we think that partners shouldn’t
act like bankers. But if this is something you really want to do, check
with a real estate lawyer about how to do it in your particular state.
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tip
Tenancy by the entireties is available to married couples. In some
states, married couples, including same-sex couples and registered partners
in marriage-equivalent states, can take title as tenancy by the entireties. Both
spouses have the right to enjoy the entire property. Neither one can unilaterally
end the tenancy, and creditors of one spouse cannot force a sale of the property
to collect on a debt. When one dies, the survivor automatically gets title to the
entire property without a probate court proceeding.
Tenancy-in-Common
Tenancy-in-common is the other way to hold title when there’s more than
one owner. The major difference between joint tenancy and tenancyin-common is that tenancy-in-common has no right of survivorship.
This means that when a tenant-in-common dies, that person’s share of
property is left to whomever is specified in a will, or if there’s no will, by
the process of “intestate succession.”
Of particular importance in many lesbian or gay real estate ventures,
tenants-in-common can own property in unequal shares—one person
can own 80% of the property, another 15% and a third 5%. All are
listed on the deed as tenants-in-common. You can specify the precise
percentages on the deed if you wish—for example, “The owners named
are tenants-in-common; Sophie has a one-third interest and Janet has
a two-thirds interest.” More commonly, you can simply list all owners’
names on the deed and set out the shares in a separate written agreement.
Especially if shares are unequal, it’s essential that you prepare a contract.
Changing Title
If you take title in one format and later agree you want to change it, you
can do so; you need only record a new deed. For instance, if you want
to start as tenants-in-common and later change to joint tenants, make
and record a deed granting the property “from Sophie and Janet as
Tenants-in-Common, to Sophie and Janet as Joint Tenants, with right of
survivorship.”