The Meaning of Ownership Interest in Real Estate
Ownership interest simply refers to the rights of an owner. The ownership interest in real estate is similar to that in other types of property. Owners have the right to determine the use of the property, the right to receive the benefit or service of the property and, in most cases, the right to delegate or sell any of their ownership rights. Because real estate property changes hands many times over many generations, the ownership interest is often divided among several parties or severed into different rights of use.
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Identification
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An ownership interest in real estate refers to a claim of title and some right to the property. Possession, which refers to the actual use of the property, is only one such right. Others include the right to remove minerals from the property, the right to receive income earned by the property and the right to transfer the property by sale or will. Depending on how the title is held, the owner of a partial interest might be able to sell their fractional portion of the property or might be entitled to a prorated share at the time the entire property is sold.
Types
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Governments typically own land in what is known as allodial title, which is absolute an unencumbered. Individuals who have unencumbered ownership in real estate are said to possess title in fee simple, which means the property is subject to taxation, eminent domain and the police power of the state. If a property owned in fee simple is transferred in any conditional way or becomes the subject of a potential claim (if pledged as collateral, for instance), the property is no longer held in fee simple. This commonly happens when ownership is divided or certain rights, such as the right to remove timber, is severed from the title.
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Joint Tenancy
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One of the most common types of ownership in real property, particularly involving spouses, is joint tenancy. In this arrangement, each owner has an equal but undivided share. Each owner has the right to possess (access and use) the entire property even though each has only a partial ownership interest. Joint tenancy usually is accompanied by right of survival, which means the interest of one joint tenant, on his death, automatically transfers to the other joint tenant(s). Tenancy in the entirety prohibits an owner from selling her interest without the other owner's consent.
Tenancy in Common
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In a tenancy in common arrangement, ownership interests do not have to be equal. Each partial owner has the right to possess the entire property and to collect income generated by the property in proportion to his ownership interest. Unlike right of survival in joint tenancy, a tenant in common is able to transfer her ownership interest after death by will; it does not automatically transfer to the other partial owners.
Future Interest and Life Estates
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It is possible to have a future interest in property. If, for example, a partial owner in real estate held with a tenancy in common title creates a will bequeathing the property to a child, that child has a future interest in the property. That ownership becomes a present interest when the interest transfers to the child by operation of the will. Similarly, future interests can be held by beneficiaries of an estate.
Future interests are conditional and, in some cases, might never be realized as a present interest. They also can exist for more than one generation if, for example, a decedent wills ownership interest to a sibling for his lifetime and then to his child. Both the sibling and the child have conditional future interests, but the sibling has what's called a life estate--the right to use the property during his lifetime, but he cannot sell it. If the child survives the sibling, the child then receives the property with no limitations.
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