Real Estate

Co-ownership Considerations

Real estate can be classified as residential or commercial. Residential property can be classified as single family homes, cooperatives, or condominiums.There are several ways that ownership of real estate can be held.

Different Ways to Hold Title to Your Home

Most real property in the United States, including single family homes, is owned in fee simple, which basically means you have complete or absolute ownership of your property. Under fee simple ownership, as a buyer, you purchase a piece of property, and you'll hold title to that property. The deed to the property serves to convey or transfer the title to you. As a new homeowner, you'll pay taxes on the property and you probably have a mortgage. One advantage of being a homeowner is that you can deduct interest paid on the mortgage and real estate taxes for federal income tax purposes.

Many homes are owned by more than one person. The owners can hold title to the property as joint tenants, tenants in common, or tenants by the entireties. These different forms of ownership allow for more than one person to own a property, and the interests each person has in the property might vary as well. In a joint tenancy, all of the joint tenants own the property as co-owners in fee simple. Each joint tenant must have unity of interest, time, title, and possession with the other tenants; this means that each joint tenant's ownership in the property is of the same type, created at the same time, and that they have equal rights to possess and use the property. In addition, if one joint tenant dies, the interest passes to the remaining joint tenants rather than to the joint tenant's estate and heirs.

In a tenancy in common, the co-owners are called tenants in common, and they each own an undivided fractional interest in the property. The only unity required among the tenants is the unity of possession, meaning each tenant has the right to possess and use the property. For example, three people could own a house as tenants in common, with one person having a one-half interest and two other people each having a one-fourth interest in the property as tenants in common. Each tenant is also free to sell his interest in the property, or to give it to someone in his will.

In a tenancy by the entireties, the owners of the property are husband and wife. This is a joint tenancy with the additional unity of the marital relationship. The tenants each own the entire property, and the survivor of the two takes the property under the original deed. This form of ownership can also provide protection from creditors, as creditors can't seek payment on debts owed by one spouse against a home held by a married couple as tenants by the entireties-the couple must agree to allow the property to be used to secure the payment of a debt. Depending on state law, this form of ownership might be limited to the couple's home.

Homeowner Associations

Sometimes homes are built by a developer as part of a planned unit development. Under this concept, zoning regulations are more flexible, and buildings and streets are all constructed according to a common plan. After construction is finished, the amenities and common areas are turned over to a homeowner association, which owns and maintains them.

Homeowner associations can have the form of corporations, real estate joint ownership, and trusts. Corporations have the feature of limited liability and are a popular organizational form. Yet the suitability of any organizational form depends on the circumstances.


A cooperative is a group venture, in which individuals can:

  • Have a possessory interest in a residential apartment unit
  • Co-own a building containing those apartment units and collectively hold title to the entire premises
  • Be represented by an entity, such as a board of directors that is composed of, and selected by, the residents/owners
  • Be organized by means of a corporation, trust, or other form of co-ownership

The form of cooperative development most commonly used is the cooperative apartment corporation. It is usually organized as a stock corporation for the purpose of obtaining an apartment building to be operated on a cooperative basis. Under this plan:

  • The corporation holds title to all the premises
  • The prospective tenant purchases stock in the corporation and is entitled to a proprietary lease for an apartment
  • Purchasers of apartments are both stockholders in a cooperative corporation and tenants
  • The co-ownership form of housing cooperative, such as joint tenancy and tenancy in common, has proven extremely impracticable, mostly because of the difficulties of conveying a fee simple interest to individual owners.

    In the trust form of cooperative ownership, an express trust is created. Title to the property is conveyed to the trustees, who issue a declaration of trust. The declaration of trust and the proprietary lease are the governing documents. People who own the units are issued a beneficial interest.


    A condominium is an estate in real property consisting of two real property interests:

    • Fee simple ownership of a unit within a building or other property, and
    • A tenancy in common with other co-owners in the common elements of the property

    In a condominium building, individual units within the dwelling are purchased outright, with each buyer receiving a deed for a particular apartment-essentially this means buying the air space between the walls of a building. Each owner also holds an undivided interest in the building's common areas, which includes everything from the roof to the entry foyer or recreational areas like a meeting room, gym or a pool.


    The different methods of purchase and occupancy of a cooperative and a condominium result in differences in mortgage financing, as well as maintenance and control. The cooperative obtains mortgage financing collectively, through a cooperative corporation. Mortgages obtained are usually a single ''blanket mortgage'' for an entire building. Interest paid on the mortgage and real estate taxes are deductible for federal income tax purposes for cooperative housing unit owners.

    In a condominium, individual owners get mortgage financing individually, using only their individual unit as security. Individual condominium unit owners pay real estate taxes on their unit, which, along with mortgage interest, are deductible under federal income tax law. The condominium assessments, which are used to maintain common areas, are not tax deductible.

    Residential Leases

    In a residential lease situation, a landlord owns a property in fee simple, sometimes subject to a mortgage. The building on the property can be divided into apartments or units, and tenants can lease the units. There is no ownership interest conveyed, and tenants simply acquire a right to occupancy of the premises for a definite period. This interest is conveyed through a lease, which is a contract. Tenants have no equity interest in the property, and they can't take any federal tax deductions for rent.

    If you have questions about ownership interests in real property, consider contacting a real estate attorney in your area.

    Questions for Your Attorney

    • Are there drawbacks to buying into a cooperative? Is a condominium better for me?
    • What factors about a condominium development affect the kind of mortgage I can get?
    • If I'm buying a house with my spouse, which form of ownership is best? Can we change the form of ownership later?
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