Generally. The concept of title to land, i.e. its “ownership”, is fairly obvious, just like ownership of a vehicle, personal property, or other tangible and intangible assets. Similarly, evidence of title, e.g. the deed, is generally understood. What can become complicated, however, is “how” title should be held. And what is the significance of selecting one form of ownership over another?
For example, assume John Doe buys a home, and thereafter marries Jane. John has one adult daughter; Jane has no children. Life is so blissful, that neither of them think about the Doomsday Scenario, i.e. John dying prematurely, owning the home in his name alone, and leaving a wife and his adult daughter. John does not have a will. This means he has died “intestate” and his estate will have to be probated – a process of accumulating his assets and legally determining who shall inherit them. Without the will, the rules of “intestate succession” apply, which means John’s estate will be distributed according to a statutory hierarchy, which may or may not be what he would have wanted had he and Jane thought about it.
Generally[1], under Oregon law, an undivided one-half of John’s entire net estate (including the home) will go to Jane, and the other half to John’s adult daughter.[2] While Jane, and John’s daughter, may be able to work everything out amicably, the fact remains that had John discussed this with Jane in advance, they might have decided to hold title to the home jointly, as husband and wife. Even with no will in existence, had the title been changed to both their names, she would have automatically acquired John’s undivided 50% interest upon his death, thereby automatically becoming the 100% owner of the home. Changing title to the property would have been a simple process; yet having not done so, means the probate court with distribute John’s estate in accordance with the rules of intestate succession.
What follows is a brief summary of the various ways Oregonians can hold title to real estate located in this state. This is not only when there are two or more owners, but also when there is only one, but he or she wants to hold it in the name of an entity for certain reasons.
Caveat: The following information is not to be construed as legal advice or a solicitation for legal representation. It is informational only and is not intended to replace legal or estate planning advice from your attorney, CPA or tax consultant.
1. Individual Ownership – In Oregon, one may hold title to real property in their individual name, regardless of whether they are married.[3] If the sole title holder is married at the time of their death, the real property will transfer in accordance with his or her will, or if there is no will (as in John Doe’s case), it will transfer in accordance with the laws of intestate succession. See, ORS Chapter 112, as amended by Chapter 42 Oregon Laws 2016 (HB 4102).
2. Tenants by the Entirety (i.e. Husband and Wife) – A conveyance to spouses married to each other automatically creates a “tenancy by the entirety” unless the deed “clearly and expressly declares otherwise”. See, ORS 93.180(1)(b). This means that a conveyance to John Smith and Jane Smith (with or without identifying them as “husband and wife” or “as tenants by the entirety”) will create a tenancy by the entirety, which carries with it the right of survivorship (discussed at Section 5, below), so long as they were legally married at the time of the conveyance.[4] However, since we are not a community property state, in Oregon, married persons can hold title in their individual names, free and clear of any claim by their spouse.[5]
3. Domestic Partnership – ORS 106.310 provides that a “Domestic Partnership” is a civil contract entered into between two persons of the same sex who are at least 18 years of age, and one of whom is an Oregon resident. Pursuant to ORS 106.340, all rights and privileges granted to individuals because they are (or were) married, are also granted to persons who have legally satisfied the registration provisions[6] of Oregon’s Domestic Partnership laws. This means that domestic partners may hold title to real property subject to the same laws described in all of the other forms of ownership available to married persons of the opposite sex. For purposes of this article, all references to “married persons” shall include domestic partners.
4. Tenants in Common – ORS 93.180(1)(a) provides that a conveyance of land to two or more unmarried persons creates a tenancy in common. Ownership by “tenants in common” means that as each co-owner dies, their interest goes into the decedent’s own estate for distribution to his or her heirs, or the person(s) designated in the will. This is different from ownership which carries a right of “survivorship”, where the decedent’s interest automatically goes to the surviving co-owners, and not into the decedent’s estate.
Unless the deed of conveyance “clearly and expressly declares” that the grantees are to hold title with the right of survivorship, it will be presumed they hold title as tenants in common. So, for example, a conveyance to “John Smith and Robert Jones”, without more, will create a tenancy in common.
5. Survivorship Estates – A “right of survivorship” means that as between two co-owners, upon the death of the first owner, the survivor acquires the decedent’s share and therefor owns 100% of the property, as the sole owner. If there are multiple co-owners, all holding a right of survivorship, as each owner predeceases the other(s), the remaining survivor(s) jointly acquire(s) the share of the decedent. Ultimately, the last survivor will end up owning 100% of the co-owners’ interest that predeceased him or her.
However, in order to convey title to co-owners with a right of survivorship, it must be expressly stated in the deed – otherwise, without more, it will be presumed to be a tenancy in common. So, for example, if a grantor intended to create a right of survivorship to and unmarried couple, John and Mary Doe, the deed should read “…to John and Mary Doe, with the right of survivorship and not as tenants in common”. This language meets the requirement in ORS 93.180(1)(a) of “clearly and expressly” disavowing the tenancy in common, and creating co-ownership with a right of survivorship.
6. Entity Ownership – Some people choose to hold title to real estate in the name of a legal entity, other than in their own individual name. Certain entities, such as corporations or limited liability companies, have an indefinite duration, i.e. they generally last as long as they are legally recognized by the state of their creation. Other entities, such as partnerships and joint ventures, if they are composed of individuals, last only so long as the life of the last participant, or until they are dissolved, whichever first occurs.
Even if the entity was not created in the state of Oregon, it should be registered here before holding title. This is because foreign entities should be registered in the state of Oregon to do business in this state.
When the entity holding title to real estate is dissolved, voluntarily or involuntarily, the determination of who acquires ownership of the land can become messy and confusing. For that reason, there should always be one or more persons responsible to assure that the entity holding title maintains proper records, and that it remain in good standing with the state in which it was created, as well as the state of Oregon.
7. Representative Ownership – It is not unusual to see ownership of land being held in the name of a person serving as a legal representative of the true owner. This can occur in several different circumstances: E.g. a personal representative of an estate, where the decedent held title; a person serving as a trustee for a trust created by the true owner(s), frequently for estate planning purposes; a receiver appointed by the court, usually where control of the owner’s estate is taken over for purpose of liquidation and distribution to creditors; a trustee in bankruptcy, etc.
Conclusion. While land may be held in a number of ways, there is one abiding principal necessary to assure that a clear and continuous chain of title leads to the current owner: One may not convey out title to land unless they have first received it in their own name. Or, in more legalistic jargon, one must first be a grantee before they may become a grantor.
For example, Mary may not convey title to John, until Mary first holds title. If Mary does not hold title in her own name, but she nevertheless conveys title to John (either intentionally or negligently), he gets nothing, since Mary had nothing – at least as so long as Mary does not later acquire title.[7]
Related to the uninterrupted-chain-of-title-requirement is the importance of accuracy and consistency in the names of successive title holders. For example, if John Q. Public acquired title to land as a “grantee” in his full name, then that is exactly how his name should appear when he conveys title out as a “grantor”. If the deed he uses to convey title to a third party is in the name of “John Public”, or “John R. Public” or some other variation of his name as it appeared when he acquired title, there will be a problem. This is not to say the error is fatal, but just inconvenient when title needs to be conveyed in closing; everything will come to a halt until the title insurance company secures satisfactory verification that “John Public” is the same person as “John Q. Public”. ~Phil
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[1] I do not do any estate planning or probate work. Accordingly, this example is based solely upon my very limited knowledge of this area of the law.
[2] See, ORS 112.025 and 112.045 (Amended 2016).
[3] Oregon is not a “community property” state. “The theory underlying community property is analogous to that of a partnership. Each spouse contributes labor (and in some states, capital) for the benefit of the community, and shares equally in the profits and income earned by the community. Thus, each spouse owns an automatic 50% interest in all community property, regardless of which spouse acquired the community property. Spouses may also hold separate property, which they solely own and control, but the law in the community property states does not favor this. *** Spouses are also considered to share debts. Depending on state law, creditors of spouses may be able to reach all or part of the community property, regardless of how it is titled, to satisfy debts incurred by either spouse. State laws vary greatly on what property can be reached.” See, IRS, 25.18.1, Basic Principles of Community Property Law.
[4] I believe the better practice is to say, John and Jane Dow, “husband and wife” or “…as tenants by the entirety”.
[5] Note that upon divorce in Oregon, each spouses’ separate property are still fair game when the judge issues a ruling as to who will own what, going forward.
[7] However, if Mary later acquires title, the oversight may be resolved. There is a legal principle called “after-acquired title” which causes the recently acquired title to automatically “flow through” the successive title holders to the current title holder. It is a fictional (but useful) patch that, if certain conditions are met, works to remove the flaw in the chain of title, thus vesting title to the land in the current owner. It is beyond the scope of this summary. For the incurably curious, go to my post here.
