Understanding Tenancy And Different Ways to Own Property

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When two or more individuals own property whether it’s a home, or a piece of land, the relationship between the owners is known as “tenancy.” There are three common ways that a tenancy can be structured, and how it is done will determine such important considerations as whether an interest in the property will pass freely or by operation of law at an owner’s death and whether creditors can claim the property.

Tenancy comes in three common forms: tenancy in common, joint tenancy and tenancy by the entirety. Each has advantages and disadvantages so it is very important that the deed is properly drafted to accomplish its intended purpose. Otherwise, if the deed is not clear the state default rules will determine which form of tenancy applies and in Pennsylvania the default rule is tenancy in common.

Tenancy in common allows an owner the greatest flexibility to transfer the property. Each co-tenant in a tenancy in common has an interest in the property and is free to transfer this interest during life or through a will. The co-tenants can have different ownership interests; for example, three owners could own 3 percent, 27 percent and 70 percent of the property, respectively, as tenants in common. Each tenant can sever his relationship with the other tenants by conveying his interest to another party. This third party then becomes a tenant in common with the other co-tenants.

Joint tenants, on the other hand, must have equal ownership interests in the property. So, three owners would each have a one-third interest in the property. If one of the joint tenants dies, his interest immediately ceases to exist and the remaining joint tenants own the entire property. The advantage to joint tenancy is that it avoids having an owner’s interest probated upon his death since his interest passes by operation of law. This is why jointly owned property is considered non-probate property.

Another advantage is if a joint tenant needs to apply for Medicaid in Pennsylvania the State will not put a Medicaid lien on the property if it is a primary residence of both joint tenants. A disadvantage to both joint tenancy and tenancy in common, however, is that creditors can attach the tenant’s property to satisfy a debt. For example, if a co-tenant defaults on his debts, his creditors can sue in a “partition proceeding” to have the property interests divided and the property sold, even over the other owners’ objections.

A third form of tenancy is tenancy by the entirety which avoids this problem, but it is available only to married or, where applicable, civilly united couples. Tenancy by the entirety is based on the societal value of protecting the family. One tenant cannot convey his interest on his own, unlike with the other tenancies. Upon the death of one spouse, his interest automatically passes to the other spouse by operation of law, as with joint tenancy, and the creditors of one spouse cannot attach the property or force its sale to recover debts unless both spouses consent.

Creditors may place a lien on property held in tenancy by the entirety, but if the debtor spouse dies before the other spouse, the other spouse will take ownership of the property free and clear of the debt. This is why both husband and wife are required to sign the mortgage on their property for the mortgage to be valid.

If you have any questions about tenancy or need a deed updated or prepared feel free to contact Gregory J. Spadea at 610-521-0604 from Spadea & Associates, LLC in Ridley Park Pennsylvania.

What Every Residential Landlord Should Know In Pennsylvania

Due Diligence in Screening Prospective Tenants
You should have the prospective tenants fill out a rental application and sign consents so you can request their credit report. Ensure the prospective tenants have stable employment and check their references by calling their current landlord. If the tenant does not have good credit, find out why. If the tenant has a reasonable explanation for not having good credit such as a divorce, get the tenant to have a cosigner who has good credit to sign the lease with them.

Have a Good Residential Lease
The lease is very important and should outline what each party can expect from the other party during the lease term. It should contain rules that the you expect the tenant to follow. The lease should explain what charges are paid by each party such as utilities, landscaping snow removal, etc.

The lease should address late charges and eviction procedures including how long you are required to store the tenant’s belongings that are left behind. The lease should include a clause regarding Act 215 so you can recover back rent through wage garnishment. It should also have the tenant waive the written notice to quit. The lease should require the tenant to pay landlord’s attorney fees if he is evicted. It should address the notice period each party must give to terminate the lease after the first year. The lease should require the tenant to provide pay stubs annually so you can verify their employment.

Security Deposit
I recommend you take pictures of the property before you rent it. Then walk the tenant through the rental property so the tenant can see there is no property damage. Then when the tenants move out if there is damage you can take a picture of the damage and provide the tenant with before and after photos so you can explain why you are taking their security deposit. You should always give your tenants a receipt if they pay the rent or security deposit in cash indicating the date and amount received.

Limiting your Liability
You should deposit the rent in a separate bank account and should have the rental property owned by a Limited Liability Company (LLC). If you do not want to pay the 2% transfer tax to transfer the property in the LLC’s name you should have a $1,000,000 umbrella policy in addition to a $300,000 liability policy on the rental property itself. You should require your tenants to have content coverage insurance so their contents can be replaced if there is a fire or other damage. You should require the tenant to provide you with the insurance policy declarations page on an annual basis.

If you have any questions or need a good lease feel free to call Gregory J. Spadea of Spadea & Associates, LLC in Ridley Park at 610-521-0604.

Why Do I Need a Real Estate Lawyer To Buy My First Home?

Interior View Of House
A real estate lawyer can help you negotiate and read the real estate sales contract, and make sure you understand all the terms and that your interests are protected. Remember, Spadea & Associates, LLC work for you and only you whereas the Realtor works for the seller. We will also ensure all the inspection and mortgage application deadlines are realistic.

Spadea & Associates, LLC can also help you find a title insurance company that will provide the proper coverage required by Pennsylvania or New Jersey law at the lowest cost.

If you need a survey, the Firm will assist you in hiring a surveyor or architect. I will also help you read the survey.

We will help you find and hire a home inspector and ensure the sales agreement allows you enough time to get the required inspections for radon and or termites before moving forward with the sale.

Spadea & Associates, LLC will help you find a mortgage broker or credit union to get the lowest mortgage rate based on your credit report, loan to property value ratio and interest rates. I will help you interpret the Good Faith Estimate to ensure you do not pay any unnecessary fees or points.

Prior to closing we will inspect the mortgage commitment letter, title commitment letter and settlement sheet to ensure they are accurate and reflect the sales agreement terms.

At closing we will go over all the settlement documents with you and ensure you receive a copy of the settlement sheet, mortgage, deed and note. I will also recommend some property insurers to protect your new home with the correct coverage.

After closing we will review your real estate tax assessment and file a real estate tax appeal with the County if the purchase price is less than the assessed value of your new home multiplied by the common level ratio in effect at the time of the closing.

If you are trying to buy a property in Pennsylvania or New Jersey, feel free to call Spadea & Associates, LLC at 610-521-0604.

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