What is a Title?
When someone purchases a home or property, the title transfers to them. This means the buyer legally assumes ownership of the property from the seller. But there’s no paper trail for a title.
Title is actually an abstract concept that gives the buyer legal ownership of a home; it’s not a piece of paper that shows legal ownership. That is a deed. The title represents what is commonly referred to as a bundle of rights that dictates who has legal possession or interest in a property. That bundle of rights can vary by state and situation, but usually includes:
- Right of possession. The person who possesses the title is the legal owner of the property.
- Right of control. If you have the title, you have the right to use the property in any legal way you want.
- Right of enjoyment. This gives you the right to enjoy your property without outside interference or disturbance.
- Right of disposition. The title holder can legally sell or rent the property they own.
- Right of exclusion. As the title holder, you have the right to deny anyone entry into your home.
These rights, however, are not absolute. Some may be subject to limitations and exclusions such as homeowners association rules, easements on a property, tax liens, and law enforcement. For example, the right of exclusion would be impeded upon if law enforcement has a search warrant for the property or disposition would be affected if there is a mortgage on the property.
Another important consideration for understanding property title is how the title is held. Such rules vary by state, but these are the most common title ownership options:
- Sole ownership. Only one person holds the title to the property in their name; ownership is not shared with anyone else. When a sole owner dies, their will or trust dictates what happens to the property. If there is no will, state law will dictate the transfer of the property.
- Joint tenancy. Two or more people hold equal, undivided interest in the property (called joint tenants). If one of the owners dies, their interest automatically passes to the co-owner (right of survivorship); it cannot be willed to someone else.
- Tenancy in common. Two or more people co-own a property, but the interest is split however they choose. All co-owners have equal right to possess the whole property, and each owner has the right to do what they want with their ownership interest – sell, rent, give away, will it to someone, etc.
- Community property. In some states, property obtained during a marriage by one spouse is considered community property, or belonging equally to both spouses. State laws dictate the right of survivorship for community property.
- Tenancy by entirety. In some states, married couples are considered a single legal entity in property ownership. It includes the right to survivorship and each spouse would need permission from the other to take any actions with their interest.
How you hold the title matters. There may be financial ramifications in how it’s held, and it will dictate who owns the property and how it’s transferred after your death. So, it’s important to do your research and plan accordingly before closing on a home or property.
