There are different types of commercial property ownerships and with each type comes a set of pros and cons. Here’s everything you need to know about different types of property ownership to help you prepare for the responsibilities that come with it.
There are six types of property ownerships which include sole ownership, joint tenancy, tenancy in common, Tenants by the Entirety, Owning Partnership (LLC), Owning Corporation, Owning Trust. Engaging a commercial real estate attorney will help you understand the legal aspects of these ownerships in detail.
Here’s a detailed description of each type of ownership to help you understand them better:
In solo ownership, the complete ownership of the property rests with a single person. As a result, all decisions about renting or selling the property can be taken by the owner himself and do not need any approvals from tenants.
This kind of ownership is usually used for multi-family rentals such as duplexes and triplexes and small retail properties. However, a commercial real estate attorney can guide you on the major drawback related to the transfer of the title. In the process, a sole owner’s heir will have to probate their estate, which is time-consuming and expensive.
This is one of the most common types of land ownership. In this case, two or more tenants have equal claims to the property, rights, income, and even mortgage and tax payments.
An important aspect of this kind of ownership is the right to survivorship. This means that if one of the owners passes away, a commercial real estate attorney can help in easily transferring to the surviving owner. However, this clause needs to be included specifically in the deed or agreement that the parties make.
There are a few drawbacks to this too. For instance, if one of the tenants has unpaid debts, a creditor can initiate a forced sale of the asset. Furthermore, if a sale is initiated each tenant must agree to it.
Tenancy in Common
In the case of tenancy in common, the property is co-owned by two or more persons. This property can be split between the owners in percentages, hence there are no equal rights in this case. Engaging a commercial real estate attorney can be helpful. There are no survivorship rights included in this ownership type. In the event of death, this property is acquired by the heirs. This tenancy type is commonly used for commercial property and land ownership.
Tenants by Entirety
This type of ownership is when a married couple owns equal rights to a real estate asset and any income from it. In this arrangement, the owners have the advantage of the rights of survivorship. However, if the couple divorces, the two owners automatically become tenants in common. However, there is a drawback in this case.
In case, one of the owners wants to sell the property, the second owner must give consent to the sale. This can also be seen as an advantage as this clause will protect the property from any unauthorized sale. Most people engage a commercial real estate attorney for such ownerships.
Owning Partnership (LLC)
LLC or Limited Liability Company is a form of owning partnership wherein the title of a commercial real estate asset is held through an owning partnership. The biggest advantage in this form of ownership is it provides its members limited liability, which reduces property ownership. Furthermore, this type of ownership provides tax benefits to the owners. The members pay the business taxes through their tax returns and the LLC itself does not have to pay any taxes. Engaging a commercial real estate attorney can be helpful for LLC owners.
Corporations are separate legal entities and hence can also hold the title of a real estate asset. However, there is a downside of this form of ownership is the liability. For instance, if a person sustains an injury on the premises of the corporation, it can be sued, an asset can be acquired and sold by a creditor. Most owners take up liability insurance to mitigate this issue.
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Hale Law is a premiere Fort Myers, Bonita Springs, Estero commercial real estate attorney law firm. Real estate transactions are complex and can be difficult to navigate without legal assistance. We assist buyers and sellers through the legal process for the transfer of ownership of property. If you are looking for a real estate attorney in Cape Coral, you can get in touch with us by writing to us at email@example.com or call us at 239-931-6767.