Best if printed in landscape.

The previous page introduced the highest form of ownership (a fee simple absolute) and the idea that more than one person can have rights to an item of property (that is, more than one person can have some sticks in the bundle of rights). For example, in a life estate, the life tenant has the "stick in the bundle" to possess and use the property at this time, and the remainderperson holds the right to possess and use the property after the life tenant dies. They each have distinct rights in the same property.

This page continues to expand on those ideas but this time the individual rights we discuss are shared by more than one person; that is, you and I jointly control the SAME legal right or "stick in the bundle." It may be easiest to understand this topic if you begin by thinking of it as "co-owning a fee simple absolute."

This page also introduces 1) co-ownership between spouses and 2) the division of property if the spouses divorce.

Concurrent Ownership

Most common forms of concurrent ownership (note the graphic) are 1) joint tenancy with right of survivorship, and 2) tenancy in common.

Joint Tenancy with Right of Survivorship

• A joint tenancy with right of survivorship is a type of co-ownership where upon the death of one of the co-owners (one of the joint tenants), the interest (property rights) of the deceased joint tenant (co-owner) passes to the other (surviving) joint tenants regardless of what the will of the deceased co-owner [or intestate succession statutes if the person died without a will (N.D.C.C. chapter 30.1-04 )] may require.
• This type of co-ownership is often referred to as joint tenancy . Each co-owner of a joint tenancy is referred to as a joint tenant.
• North Dakota's definition of a joint tenancy/interest is "one owned by several persons in equal shares by a title created by a single will or transfer, when expressly declared in the will or transfer to be a joint tenancy, or when granted or devised to executors or trustees as joint tenants." N.D.C.C. §47-02-06 .
• Joint tenancy is somewhat disfavored because the co-owners cannot direct where their property rights should go upon their death, unless they are the last of the joint tenants to die.  Therefore, in order for co-ownership to be a joint tenancy, specific requirements must be met.
  • Unity of time (ownership interest of joint tenants must arise at the same moment of time).
  • Unity of interest (joint tenants must have exactly the same interest).
    • For example, each co-owner (joint tenant) must own 50% if there are two co-owners, or 33.3% if there are three co-owners.
  • Unity of title (ownership interests must have arisen from the same legal document).
  • Unity of possession (joint tenants must have same right to possess property).
  • Legal document conveying ownership (usually a deed) must use requisite language; for example, "To Joe and Mary Brown as joint tenants with right of survivorship and not as tenants in common."
• Exception -- a sole owner of real property can create a joint tenancy with another person, even though the shared ownership would not meet the unity of time and unity of title. N.D.C.C. §47-10-23.
• If the requirements of a joint tenancy are not met, the co-ownership will then be a tenancy in common.
• The last surviving joint tenant would be the sole owner of the property.  Upon the death if this last person, the property will transfer to that person's heirs (whether specified in a will or determined by the state's intestate succession law). The heirs of the joint tenants who had died earlier would not receive any interest in this property. Again, this outcome is why joint tenancies are somewhat disfavored unless the co-owners fully understand what they are doing.  For example, a married couple owning their home as joint tenants may be very reasonable, but they may not want all of their co-owned properties held in joint tenancies.

Tenancy in Common

• A tenancy in common is a type of co-ownership wherein the property interest of the tenant-in-common (co-owner), upon death, passes according to the deceased co-owner's will, or according to the intestate succession law if the deceased co-owner died without a will.
• Tenants need not have equal ownership interest, but must have equal right to possess the property. For example, one co-owner may own 75% of the property, another own 15% and a third own 10%, but they all must have equal right to possess the property.
• North Dakota's definition of an interest in common is "one owned by several persons not in joint ownership or partnership. Every interest in favor of several persons in their own right is an interest in common, unless acquired by them in partnership for partnership purposes, or unless declared in its creation to be a joint tenancy." N.D.C.C. §47-02-08.

Points of Clarification

• The decision of whether co-owned land will be a joint tenancy or a tenancy in common is made by the buyers when the land is purchased.  For example, the buyers will indicate to the seller (in the purchase agreement which is discussed in another section) whether they want to receive the land as joint tenants or as tenants in common.  The seller will then specify the appropriate form of co-ownership for the new owners/buyers. 
• Landowners also can direct how land will be co-owned by heirs by indicating in a will that the "land shall transfer to my heirs as a joint tenancy" or the "land shall transfer to the heirs as a tenancy in common". 
• Likewise if the current owner transfers the land to co-owners as a gift, the form of co-ownership is specified in the deed that the owner uses to transfer the ownership to the new co-owners.
• Of course, if the ownership rights of the co-owners do not arise from the same transaction, the only form of co-ownership would be a tenancy in common because the transfer would lack one or more of the requirements necessary for a joint tenancy (as described above).

Rights of Co-owners (whether joint tenants or tenants in common)

• All concurrent owners have equal right to possess the property.
• Each owner has the right to sell his or her interest in the property to another person.
  • Joint tenants or tenants in common may sever the tenancy and convey their interests without the consent of all tenants, if they choose to do so; see Wachter Development v. Gomke
  • The right of a co-owner to sell or convey their interest (but only their interest) in the property to another person (and to do this without the permission of the other co-owners) reflects the idea that we want our property to be transferable. The assumption is that our overall economy and society will achieve the greatest benefit if our resources (our property) are put to their "highest and best" use (but without abusing the resource).  We further assume that the persons who are willing and able to put the resource to its highest and best use are willing to pay the most, and an owner who is not willing or able to put the property to the same high level of use will sell it to the other persons so they can pursue their vision. Accordingly, we do not want laws to unnecessarily restrict the transfer of property rights.
• If a co-owner is not taking an active role in managing or using the co-owned property, the co-owner in possession has the right to retain the produce or profit from the property but must pay the property taxes, maintenance costs, and mortgage payments.
• A co-owner has the right to have the property partitioned (divided) by the court, or to have it sold by the court with the proceeds divided among the co-owners (N.D.C.C. Chapter 32-16).

Co-ownership Between Married Persons

Joint tenancy and tenancy in common are frequently used, whether the co-owners are related family members or unrelated.  A question that often arises is whether the law is different if the co-owners are married to one another. For example, will property owned by an individual immediately be co-owned if the person gets married? Similarly, recognizing the high incidence of divorce, will property owned by an individual before marriage have to be shared with a spouse if the marriage ends in divorce?  The general answer may be "no," but the following topics address the question of "what rights do I have in property owned by my spouse?" 

A basic rule is "ownership of property does not change when a couple marries".  He will not, for example, become a co-owner in her property at the moment they are married.  The property he owns at the time of marriage will remain his, and her property will remain hers. 

The more difficult question might be "do I have a legal right in the property my spouse acquires during our marriage".  Generally, states adhere to one of two approaches in addressing the question of ownership of property acquired by a married person during the marriage; these two approaches are "community property" and "common law."

Community Property States

• The concept of community property is adhered to in eight states -- Washington, Idaho, Nevada, California (section 760 of the Family Code), Arizona, New Mexico, Texas and Louisiana; these states are highly influenced by the Spanish and French legal systems.
• A married couple shares equal ownership in their income and property acquired by one or both of them during the marriage regardless of who earned the income. 
  • The ownership of property acquired before marriage (and its appreciation and income), and property acquired by one spouse by inheritance or gift during marriage is NOT shared.

• Uniform Marital Property Act
  • Some states have considered adopting a principle similar to community property by enacting the Uniform Marital Property Act (UMPA).
  • UMPA offers the same basic rules as community property states except the income from individually-owned property is subject to joint ownership.
  • Wisconson adopted the UMPA in the mid-1980s (chapter 766). Specifically, 766.31(3).

Common Law States

• In other states, the basic rule is that income earned and property acquired by a married person is considered to be property of the individual, except for the person's legal obligation to support his or her spouse (N.D.C.C. §14-07-03) and children (N.D.C.C. §14-09-08).
• E.g., North Dakota is a common law state (N.D.C.C. 14-07). "I own the income I earn; my spouse owns the property that he or she earns. But I am obligated to use my income and property to support my family."
• A spouse who is the sole owner of property in a common law state but wants their spouse to co-own the property can create a co-ownership between them by gifting a portion of the property rights to their spouse. If the property is land, the co-ownership would be a tenancy in common, unless the owner takes advantage of a statute, such as N.D.C.C. §47-02-08, to create a joint tenancy. However, there is no legal requirement that a spouse share ownership of his or her property with their spouse.
• In case of divorce, the court "shall make such equitable distribution of the real and personal property of the parties as may seem just and proper..." N.D.C.C. §14-05-24. That is, the court has considerable discretion in deciding how property should be divided in case of divorce; the property is not necessarily divided equally, nor is it necessarily given to the spouse who owns it. Instead, the court divides the property as the court feels necessary to reach a fair or equitable distribution.

  [¶8] Under N.D.C.C. § 14-05-24, a trial court shall make such equitable distribution of the marital property of the parties "as may seem just and proper." ... Although property division need not be equal to be equitable, the trial court must explain any substantial disparity ...
  [¶9] In determining an equitable distribution of the property, a trial court must consider the Ruff-Fischer guidelines ... The Ruff-Fischer guidelines include:

  the respective ages of the parties to the marriage; their earning abilities; the duration of the marriage and the conduct of each during the marriage; their station in life; the circumstances and necessities of each; their health and physical conditions; their financial circumstances as shown by the property owned at the time; its value and income-producing capacity, if any, and whether it was accumulated or acquired before or after the marriage; and such other matters as may be material.
  Northrop v. Northrop, 2001 ND 31

• "divorce ... severs the interests of the former spouses in property held by them at the time of the divorce ... as joint tenants with the right of survivorship, transforming the interests of former spouses into equal tenancies in common." N.D.C.C. §30.1-10-04(2)(b)
• A person will not inherit from the estate of a former spouse if the will of the former spouse had not been revised since the time of the divorce; (N.D.C.C. §30.1-10-04(2)(a)).

The next question that often arises (based on these general rules about property ownership between married persons) is whether there is "something I can do to address ownership of my property as I contemplate marriage".

Premarital Agreement

• One way for a married couple to address potential property issues is to enter into an agreement before they marry.
• North Dakota statute -- N.D.C.C. 14-03.1
  • "Premarital agreement" means an agreement between prospective spouses made in contemplation of marriage and to be effective upon marriage. N.D.C.C. §14-03.1-01(2).

• Parties to a premarital agreement may contract with respect to:
  a. The rights and obligations of each of the parties in any of the property of either or both of them whenever and wherever acquired or located.
  b. The right to buy, sell, use, transfer, exchange, abandon, lease, consume, expend, assign, create a security interest in, mortgage, encumber, dispose of, or otherwise manage and control property.
  c. The disposition of property upon separation, marital dissolution, death, or the occurrence or nonoccurrence of any other event.
  d. The modification or elimination of spousal support.
  e. The making of a will, trust, or other arrangement to carry out the provisions of the agreement.
  f. The ownership rights in and disposition of the death benefit from a life insurance policy.
  g. The choice of law governing the construction of the agreement.
  h. Any other matter, including their personal rights and obligations, not in violation of public policy or a statute imposing a criminal penalty. N.D.C.C. §14-03.1-03(1).

• A premarital agreement is not enforceable if the party against whom enforcement is sought proves that:
  a. That party did not execute the agreement voluntarily; or
  b. The agreement was unconscionable when it was executed and, before execution of the agreement, that party:

  (1) Was not provided a fair and reasonable disclosure of the property or financial obligations of the other party;
  (2) Did not voluntarily sign a document expressly waiving any right to disclosure of the property or financial obligations of the other party beyond the disclosure provided; and
  (3) Did not have notice of the property or financial obligations of the other party. N.D.C.C. §14-03.1-06.

• An example of North Dakota case involving a premarital agreement -- Estate of Lutz, 2000 ND 226
• Be aware that it is sometimes "dad and mom" who want their son or daughter to enter into a premarital agreement so "that new daughter-in-law or son-in-law will not be able to make off with a portion of MY property that I worked for during MY lifetime and that I plan to transfer to my son or daughter as gifts or inheritance."  Other times, the pressure for a premarital agreement comes from the fiance.  In either case, the law places considerable importance on the voluntary nature of the agreement and the full disclosure requirement to protect persons who "who may not be thinking clearly during the excitement leading up to marriage".  On the other hand, persons with substantial property holdings or children may find a carefully planned premarital agreement is invaluable in defining their relative legal rights.

Summary of Key Points

At this point, you should have a basic understanding of

• joint tenancy and tenancy in common (note the similarities and differences between the two forms of co-ownership);
  • Specific requirements must be met to create a joint tenancy; if co-ownership is not a joint tenancy, it will generally be considered a tenancy in common
  • The decision of whether the co-ownership will be a joint tenancy or a tenancy in common is made at the time the co-ownership is created.
• community property states and common law states; and
• equitable distribution of property in case of divorce, the role of premartial agreements, and the importance of disclosure of information at the time a premartial agreement is created.

The next page introduces the concept of trusts.

E-Mail agecinf@ndsuext.nodak.edu
Published by Agribusiness and Applied Economics
Morrill Room 217, P.O. Box 5636
North Dakota State University, Fargo, ND 58105-5636
Phone: (701) 231-7441
Fax: (701) 231-7400