Understanding Real Estate Ownership Structures

A joint tenancy can be terminated in three primary ways:

1. Death: If all tenants but one pass away, the survivor becomes the sole owner, holding the property in severalty.
2. Conveyance: A tenant can sell or transfer their individual interest to someone else.
3. Partition: A co-owner can file a legal action known as a partition to force the division of the property or its sale.

Tenancy by the Entirety

A specialized form of ownership recognized in North Carolina is tenancy by the entirety. This structure is reserved exclusively for married couples (including married gay couples).

To establish this type of ownership, the deed must be signed by both spouses. Like joint tenancy, it carries the right of survivorship: if one spouse dies, the surviving spouse automatically becomes the owner in severalty.

Common Interest Communities

Modern residential living often involves shared spaces and collective management. These are known as common interest communities, which include condominiums, townhouses, cooperatives, and time-shares.

Condominium Ownership

In a condominium, ownership is split between private space and shared space:

• Fee Simple Title: An owner holds fee simple title to the "airspace" of their specific unit.
• Common Elements: Owners hold an undivided share of the building and land, known as the common elements. These are owned by all unit owners as tenants in common.
• Limited Common Elements: These are specific amenities assigned to only certain units, such as storage bins, lockers, or specific parking spaces.

Condominiums are managed by an owners' association, which oversees the maintenance of common elements using fees collected from each unit owner. Notably, while a unit can be mortgaged, a default by one owner does not affect the other owners. In North Carolina, the Condominium Act of 1986 provides consumer protection by allowing a seven-day rescission period when purchasing new units.

Cooperative (Co-op) Ownership

Cooperative ownership functions very differently from a condominium. In a co-op, no individual owns real estate:

1. Corporate Structure: A corporation holds the actual title to the land and the building.
2. Shareholder Status: Instead of buying real estate, residents purchase shares of stock in the corporation. This stock is considered personal property, not real estate.
3. Proprietary Lease: Upon purchasing shares, the resident receives a proprietary lease, which grants them the right to occupy a specific unit for the life of the corporation.

Key Distinction: Tax and Finance Even though a co-op involves personal property (stock) rather than real property, the IRS treats cooperatives similarly to condominiums or houses for tax purposes. Additionally, because the stock can be used as collateral, lenders can finance these purchases, which helps expand the pool of potential buyers.