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Choose Wisely When Co-Owning Property

Estate Planning & Real Estate Legal Update
06.19.2017

Predictability that joint owners/tenants need today:

This spring, the Tennessee Supreme Court ruled that joint property owners can eliminate the survivorship rights of jointly held property, changing their ownership to tenants in common. When two people own property jointly (i.e. as joint tenants with rights of survivorship), each is the owner of the real property; however, when one joint owner dies, the survivor becomes the sole owner. This ownership of the entire property by surviving the other joint tenant is called the right of survivorship. In contrast, when an owner of tenants in common property passes, the owner's share passes to his or her heirs instead of to the surviving joint owner.
 
The recent Bryant v. Bryant ruling affects current joint tenants of real property and any future buyers or owners throughout Tennessee. The Court ruled in favor of the ability of joint tenants (joint owners) to end the survivorship rights in order to allow any joint tenant to transfer his or her share of the property without requiring the consent of the other joint tenant. This means that before death, a joint tenant can give his or her share of property to someone else, and the other original joint tenant is forced to own the property as tenants in common with the new co-owner. The ruling ensures that the person buying half of the property from a joint tenant will not lose his or her share when the original joint tenant dies. 

Please contact us if you co-own property and have questions
about protecting your or your future heirs' interests.

 

Here's how the new ruling came to be:
 
In 2009, Ms. Bryant transferred ownership of her home to herself and her son Darryl Bryant, Sr., making them both joint tenants. So, each owned the home, and the survivor would own the home entirely after the other's passing. In 2010, Ms. Bryant transferred her half ownership in the home to her grandson, Darryl Bryant, Jr., who lived with her. Shortly after her death in 2013, Darryl Senior sued Darryl Junior, claiming to own the entire property because he was a joint tenant of the home and survived (outlived) Ms. Bryant. The Tennessee Supreme Court held that Ms. Bryant's 2010 deed eliminated the survivorship right under the doctrine of severance. As a result, the son and grandson each owned 50 percent of the property as tenants in common.
 
At common law, going back more than 200 years to before the time Tennessee was a state, if two buyers (Mr. X and Mr. Y) took property in equal shares as owners at the same time and from the same deed, they were forced to be joint tenants. For family lands, this could be an acceptable arrangement, but for commercial purchases, this requirement was too unpredictable. As a result, the courts adopted the doctrine of severance. Under the doctrine of severance, if a joint tenant (Mr. X) transferred his share of jointly held property to another person (Ms. Z), the right of survivorship he held with the other joint tenant (Mr. Y) would vanish. Now the owners would be Mr. Y and Ms. Z as tenants in common. With the doctrine of severance, Ms. Z would own her half, and neither the death of Mr. X or Mr. Y would affect what she owned. Likewise, Mr. Y's share is still owned by him, and on his death, his share will pass to his heirs.
 
While the forced joint tenancy of the colonial era has long since been abolished by statute, the Tennessee Supreme Court found, like most states, the doctrine of severance is still applicable today. Therefore, the Court ruled that Ms. Bryant eliminated the survivorship rights between herself and her son when she transferred her half of the property to Darryl Bryant, Jr. in 2010. When she transferred to Junior, her death was no longer material to their respective ownership interests. Junior and Senior each owned his respective half.
 
From a planning perspective, this ruling provides the predictability that joint owners/tenants need today. Those who don’t want to own a piece of property any longer may sell their half to anyone willing to buy. Others, like Ms. Bryant, can gift their half to a family member if they wish. Those who don’t want to lose the right of survivorship, like Darryl Bryant, Sr., now know what danger they face if they simply own property as a joint tenant. Joint tenants who may not want to have a stranger (or certain family member) for a co-owner should be aware of the risk of the severance doctrine. They may wish to reconsider with whom they jointly own property. Parents thinking of transferring their home to a child, creating a joint tenant relationship like Ms. Bryant did, should think about whether they want to face the possibility of their child transferring his or her half of the home to someone else (or convincing a bank to let that child borrow against on his or her half)!