Ways to own: estates and forms of ownership (severalty, tenants in common, joint tenancy, condo, co-op, timeshare, trusts, entities, life estates)

Bottom line first. Two questions apply to any ownership. How long does the owner's interest last? That is the estate. Who owns it, and how? That is the form of ownership. If a deed to two people is silent about how they hold title, Colorado says tenants in common.

Part 1: Estates (how long)

An estate is the degree, quantity or length of a person's interest in land. There are two families: freehold (lasts for life or forever) and leasehold (lasts a fixed time).

Freehold estates

• Fee simple absolute: the most complete ownership. It lasts forever, can be sold or left to heirs, and has no conditions. This is what most buyers get.
• Fee simple defeasible (also called a conditional fee): ownership that can end if a condition is broken. Example: "to the school district for as long as it is used for a school." If it stops being a school, the land goes back to the grantor or heirs. Two types: determinable ("so long as") ends automatically; subject to condition subsequent ("but if") ends only if the grantor takes action.
• Life estate: ownership for the length of someone's life. The life tenant may use the property but may not commit waste (damaging it in a way that harms the future owner). The life tenant cannot sell more than he or she has: a buyer gets rights only until the life tenant dies.
• Life estate pur autre vie (French for "for another's life"): the estate lasts for the life of someone other than the holder. Example: Ann gives Bob a life estate measured by the life of Carol. When Carol dies, Bob's estate ends.
• Remainder: the future right of a named third person to take the property when the life estate ends. Example: "to Ann for life, then to Ben." Ben holds the remainder.
• Reversion: the future right of the original grantor to get the property back when the life estate ends and no remainder person is named.

Leasehold estates, in one paragraph

A leasehold estate is a tenant's right to possess property for a limited time while the landlord keeps the reversion, the right to get it back at the end. There are four kinds: estate for years (a fixed end date, such as 12 months), periodic tenancy (renews itself, such as month to month), tenancy at will (no set end and either side can end it), and tenancy at sufferance (a tenant who stays after the lease ends without permission). A leasehold is generally treated as personal property, not real property, though it is an interest in real estate, which is why leasing real estate for pay is a brokerage act (C.R.S. 12-10-201(6)(a)).

Part 2: Forms of ownership (who)

Severalty

Ownership in severalty means one owner, alone. The word comes from "severed" from others. One person, or one company treated as one legal person, holds all the rights.

Co-ownership

Two or more owners share title. Two forms are common in Colorado.

Tenancy in common (TIC). Each owner holds an undivided interest (a share in the whole, not a specific piece). Shares can be unequal, such as 50, 25 and 25 percent. Each owner can sell, mortgage or leave their share by will, and there is no right of survivorship, meaning a dead owner's share goes to the owner's heirs, not to the other owners. The only unity required is possession: each may use the whole property.

Joint tenancy. Owners hold equal shares with a right of survivorship: when one dies, the survivors automatically own the dead owner's share. It skips probate (the court process of settling a will). Traditionally it requires the four unities: time (all got title at the same moment), title (from the same deed), interest (equal shares) and possession (equal right to use the whole). Colorado keeps the doctrine of the four unities, subject to the statute's own rules (C.R.S. 38-31-101(1.5)). If one owner sells his share, the buyer becomes a tenant in common with the others and the joint tenancy is broken (severed). The statute also lets a joint tenant sever the joint tenancy unilaterally by executing and recording an instrument conveying his or her interest (C.R.S. 38-31-101(5)(a)).

Colorado default when the deed is silent

In Colorado, a conveyance to two or more natural persons does not create a joint tenancy unless the deed or will declares that the property is held in joint tenancy or "as joint tenants" (C.R.S. 38-31-101(1)). The abbreviation "JTWROS" and the phrase "joint tenancy with right of survivorship" count as the same thing. Any conveyance to two or more people that does not create joint tenancy is a tenancy in common (C.R.S. 38-31-101(4)). One exception: a conveyance to two or more personal representatives, trustees or other fiduciaries is presumed to create a joint tenancy (C.R.S. 38-31-101(3)). Joint tenancy can only be created in natural persons (living people) except for those fiduciaries (C.R.S. 38-31-101(4)).

Community property. Colorado is not a community property state. Spouses do not automatically own half of everything either one buys during marriage. Divorce courts divide marital property under a different system, and spouses commonly take title as joint tenants. Some states offer a married-couples form called tenancy by the entirety; this course does not rely on it for Colorado.

Common interest ownership: condo, co-op, timeshare

Colorado's Common Interest Ownership Act (CCIOA), C.R.S. 38-33.3, governs communities where owners share common areas and pay assessments to an association.

• Condominium: you own your unit outright (the airspace inside) as real property, plus an undivided share of the common elements (hallways, roof, grounds). You get your own deed and your own mortgage.
• Cooperative (co-op): a corporation owns the building. You own shares of stock and get a proprietary lease for your unit. Technically you hold personal property, not a deed.
• Timeshare: a right to use a unit for a set period each year (such as two weeks), sometimes with a deeded ownership interest and sometimes only a right to use.
• Planned community / HOA: you own your lot and the home; the homeowners' association (HOA) owns and manages shared areas and collects dues.

Trusts, estates and business entities

• Trust: a trustee holds title for the benefit of a beneficiary. The person who creates it is the trustor (or settlor). Trusts avoid probate and can give the trustee control.
• Estate of a deceased person: a personal representative (executor if named in a will) holds title while the estate is settled. A decedent is a person who has died.
• Corporation: an artificial legal person owned by shareholders; it holds title in its own name.
• LLC (limited liability company): an entity whose members are generally not personally responsible for the company's debts. Many investors hold rental houses this way.
• Partnership: two or more owners carrying on a business; in a general partnership all partners are personally liable, while a limited partnership has limited partners with capped liability.

Example with real numbers

Three siblings, Ann, Ben and Cy, inherit a $600,000 Boulder County house, and the deed does not say how they hold title.

1. Silent deed: tenants in common (C.R.S. 38-31-101(4)).
2. If shares are equal, each owns 1/3 = $600,000 / 3 = $200,000 of value.
3. Ann dies. Because there is no survivorship, her $200,000 share goes to her heirs. Ben and Cy do not receive it.
4. Compare: had the deed said "as joint tenants with right of survivorship," Ben and Cy would automatically each own half of the house, $300,000 of value each, after Ann's death.

One missing phrase shifted $200,000 of value.