Types of Co-ownership of Real Property in North Carolina

Two or more people often own real property, such as a residence, a business location, or a
parcel of undeveloped land.  The co-owners may be spouses, relatives, friends, or business
partners.  In some situations, they have no relationship other than as co-owners of the property.

Three types of co-ownership of real property are recognized in North Carolina law.  Two of
those types, “Tenancy in Common” and “Joint Tenancy with the Right of Survivorship,” can exist
between co-owners.  The third type, “Tenancy by the Entirety,” can only exist when the co-
owners are spouses.

Tenancy in Common

The simplest type of co-ownership, which is most often in effect when the co-owners are not
spouses, is a tenancy in common.  In this relationship, each of two or more people (“tenants in
common” or “cotenants”) owns an interest in the same real property.  Their interests may be
equal or unequal in size.  For instance, three cotenants, A, B, and C, may each own a ⅓ interest
in the property, or A may own a ½ interest, while B owns a ⅓ interest, and C owns a ⅙ interest.
Each interest is called “undivided interest” because, regardless of the size of their interest, each cotenant is entitled to access, possess, and use the entire property.

Each cotenant is free to sell, give away or otherwise convey their interest in the property at any
time.  Each can also use their interest to secure a debt they alone owe to a creditor.   Upon the
death of any cotenant, their interest is transferred to others that may or may not be the other
cotenants, either according to their will or by intestate succession when there is no will.

Tenancy in Common is the presumed type of co-ownership in North Carolina, except where the
co-owners are spouses. So, for example, if a conveyance of real property is made to three people  (no two of whom are spouses) by a deed or a will, e.g., simply “to A, B, and C”, absent any language indicating that the intention is to create a joint tenancy with the right of survivorship, the three are cotenants in a tenancy in common.  Similarly, absent any language indicating otherwise, they are deemed to have equal ownership interests – in the case of a conveyance simply “to A, B, and C,” each would own a ⅓ interest.  If C were to later convey his ⅓ interest simply “to X and Y,” then the cotenants who own the property (and their respective interests) would be A (⅓), B (⅓), X (⅙), and Y(⅙).

Joint Tenancy with the Right of Survivorship

A joint tenancy with the right of survivorship (“joint tenancy”) is, in most respects, the same as a
tenancy in common.  For example, two or more co-owners (“joint tenants”) own equal or
different-sized interests in the property. Each has the right to access, possess and use all the
property and can sell, give away, or otherwise convey or encumber their interest.

The most important difference in a joint tenancy is “the right of survivorship.”  When a joint tenant
dies, their interest in the property is not transferred to others by will or intestate succession, like that of a deceased tenant in common; instead, it is automatically assumed by the surviving joint tenant(s).  If there are more than one surviving joint tenant, and their interests are
unequal, then the deceased tenant’s interest is divided among them in proportion to the
comparative sizes of their respective interests.

As noted above, co-ownership of real property by people who are not spouses is
presumed to be a tenancy in common. In order to create a joint tenancy, the
instrument of conveyance, such as a deed or a will, must express the intent to do
so. Under North Carolina law, the deed or will to the co-owners is deemed to
express such intent if it contains words like “joint tenancy”, “joint tenants” or “with
the right of survivorship.”

Any joint tenant can unilaterally cause the “severance” of the joint tenancy whereby it is, to
some extent, converted into a tenancy in common.  Severance often occurs when a joint tenant
sells or transfers their interest to a third party.  For example, if A and B are joint tenants, and B
sells his interest in the property to C, then A and C co-own the property as tenants in common.

If more than two joint tenants own property, severance by one joint tenant is more complicated. In that case, the joint tenancy is severed only insofar as the selling joint tenant’s interest is concerned. For example, if W, X, and Y own interests in real property as joint tenants, and Y sells his interest in the property to Z. W and X continue to own their interests as joint tenants, while Z owns his interest as a tenant in common.

Tenancy by the Entirety

Tenancy by the entirety is a special type of co-ownership of real property and is different from the other types in significant ways.  Only spouses can own property as “tenants by the entirety.” In North Carolina, if two people are spouses when they take title to property, they own it as tenants by the entirety unless the instrument of conveyance, or a will, clearly expresses intent to create a tenancy in common or a joint tenancy.

Unlike in the other two types of co-ownership, in a tenancy by the entirety, while the spouses
have equal rights to access, possess, and use the whole property, neither owns any individual
interest in the property.  In effect, the spouses, as a single legal entity, own the property. One
spouse cannot unilaterally sell or convey any interest in the property or use the property to secure or satisfy their debt.  To do so, they must both execute the necessary deed, deed of trust, lease, or other instrument.

A tenancy by the entirety can only be ended by: (1) the spouses jointly conveying their interests
in the property to one or more third parties or to themselves as tenants in common or joint tenants, (2) absolute divorce of the spouses, in which case the former spouses become tenants in common, or (c) death of either spouse, in which case the surviving spouse becomes the sole
owner of the property.

If you currently own or are considering buying real property with others, and you have any
questions about which type of co-ownership might best fit your situation, our experienced real
estate attorneys at Kelly & West are here to help you.  Contact us to arrange a free consultation.