When purchasing property, there are a few ways that a new owner can “take” title. There are three ways that the State of Illinois allows multiple property owners such as family members or business partners to hold title. 1) tenants in common, 2) joint tenants with right of survivorship, or 3) tenants by the entirety. Typically, new owners can choose which way to hold title and this can be changed in the future. It is important for Buyers to understand the different ways title can be held as it may affect the rights of creditors or the transfer of the property after an owner’s death.
In addition, there are different types of deeds that can be used to transfer title. There are four main types: General Warranty Deed, Special Warranty Deed, Bargain and Sale Deed, and a Quitclaim Deed. We will cover these types of deeds below after the types of title.
Tenancy in Common
Taking title as “tenants in common” is the default manner of title if one is not selected and is the most basic. In this scenario, the owners own an undivided fractional interest of the property. These ownership interests can be sold or transferred without the other owner’s consent. The physical property itself is not divided so that each owner has full capacity to use the entire property.
When one owner dies, the deceased’s ownership shares will be transferred as outlined in their will or intestacy statute and the heirs or legatees will own those shares. Tenancy in Common form of title allows creditors to place liens on the property
Joint Tenancy
Joint tenancy is similar to “tenancy in common” in that all owners have an undivided interest in the entire property and have full usage of it. In addition, the property can also be partitioned, sold, or encumbered without the consent of other owners. The main difference is the unity of ownership. To hold this kind of title, owners must satisfy “four unities” of ownership: taking title at the same time, taking title by the same document, taking title with equal interest, and undivided right to possession.
In the case an owner passes away, the remaining owners assume the rights of the deceased owner and no new person will hold title. Property passes to the surviving owners outside of probate.
Joint tenancy can only be created by a deed and can be dissolved at any time regardless of consent of owners.
Tenancy by the Entirety
Tenancy by the Entirety is only available to married couples and provides the most protection. It is similar to Joint Tenancy in that it requires the “four unities” plus marriage. The manner of holding title is also similar to Joint Tenancy in that if owner were to die, the survivor will take title outside of probate. This way of taking title also protects the property from creditors that are not creditors of joint debts. The property may not be partitioned, sold, or encumbered without the permission of both spouses and neither convey half interest without consent. The specificity of the deed must indicate marriage. Tenancy by the entirety may be terminated by a court ordered sale either to satisfy a joint debt, in the case of a death of co-owner, in the case of a divorce, or by co-owner agreement.
Types of Deeds
General Warranty Deed
A general warranty deed provides the buyer a high level of protection and includes covenants or warranties the grantor conveys to the grantee. This type of deed promises grantor/seller owns and/or has legal right to sell and that it is free of liens, debts, or encumbrances. It holds the grantor legally liable for all warranties.
Special Warranty Deed
This deed will not provide the buyer as much protection as it only comes with two warranties: the seller/grantor holds title to the property and the property was not encumbered during the grantor’s ownership. However, the property may have been encumbered before grantor’s ownership.
Bargain and Sale Deed
The buyer is not protected from encumbrances and the deed only states that the grantor holds title to the property. The property could still have liens and this deed does not guarantee clean title. These are less common and are typically used in tax sales or foreclosures.
Quitclaim Deed
Quitclaim deeds provide the least protection to buyers. This deed transfers any interest the grantor may have in the property. The grantor terminates or “quits” any right and claim to the property allowing for the transfer to the grantee. This deed does not make any warranties against liens or encumbrances and is most often used in divorces or when the history is known as well as between sophisticated parties who are less concerned with potential encumbrances.
