Best if printed in landscape.
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
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.
common forms of concurrent
ownership (note the graphic) are 1) joint tenancy with right of survivorship, and 2) tenancy
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.
- 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).
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
- 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.
Between Married Persons
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."
- The concept of community
property is adhered to in eight states -- Washington, Idaho, Nevada, California
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
- 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.
adopted the UMPA in the mid-1980s (chapter
766). Specifically, 766.31(3).
- 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.
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
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.
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)).
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".
- One way for a married couple
to address potential property issues is to enter into an agreement before
- North Dakota statute --
- "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:
The rights and obligations of each of the parties in any of the
property of either or both of them whenever and wherever acquired
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.
The disposition of property upon separation, marital dissolution,
death, or the occurrence or nonoccurrence of any other event.
The modification or elimination of spousal support.
The making of a will, trust, or other arrangement to carry out the
provisions of the agreement.
The ownership rights in and disposition of the death benefit from
a life insurance policy.
The choice of law governing the construction of the agreement.
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
That party did not execute the agreement voluntarily; or
The agreement was unconscionable when it was executed and, before
execution of the agreement, that party:
Was not provided a fair
and reasonable disclosure of the property or financial obligations
of the other party;
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
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.