Underwriting Manual: TX
19.12
Tenancy In Common
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19.12.1
In General
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| As in most jurisdictions, a “tenancy in common” in Texas is a form of joint ownership that comes into existence when real property is transferred, whether by conveyance, inheritance or operation of law to two or more persons in their own right, unless acquired in partnership, in joint tenancy or by husband and wife as community property or as tenants by the entirety. |
| The interests of the different tenants may accrue under different titles, or accrue under the same title but at different periods, or be conferred by words or limitations. However, these interests do not need to be equal in quality or duration. |
| A tenancy in common, the only necessary unit for its existence is the “unity of possession”. Tenants in common enjoy no rights of survivorship and their interests as tenants in common pass, at time of death, as assets of their states. Tenants in common may sell, encumber or devise their interests anyway they like. And on the transfer of the interest of a tenant in common, the new owner becomes a tenant in common with remaining owners. |
| In case of obscurity or vagueness in the wording used for the creation of a joint estate, the normal rule of construction is to presume the creation and existence of a “tenancy in common”. |
19.12.2
Title Considerations Relative to a Tenancy in Common
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| · | The interest of the co-tenants may be equal or unequal. |
| · | If the grant does not specify the extent or interest of each co-tenant, there is a rebuttable presumption that the shares are equal. |
| · | Any tenant in common can sell his interest in the property without the consent of the co-tenants, but no co-tenant can attempt to transfer the entire property without the consent of all the co-tenants. |
| · | It is good drafting to set forth in every real estate instrument the percentage of ownership pertaining to each co-tenant. |
| · | Each percentage of ownership must be accounted for. The interest of each tenant is attachable by creditors, divestible in bankruptcy, conveyable and subject to encumbrance as a separate and distinct interest. |
| · | Where title is being acquired by two or more persons as tenants in common, the deed should clearly define their respective interests. If their respective interests are not set forth in the instrument of acquisition or otherwise disclosed, there is a presumption that their interests are equal; but this presumption is not conclusive and may be overcome by evidence showing that by virtue of unequal contributions to the purchase price or otherwise the co-tenants hold unequal interests. |
| · | One co-tenant can never, acting alone in his individual capacity, sell or convey more than his own interest in property held in common with other parties. If attempted, a conveyance of more than said interest will be effective only as to the interest of the grantor. |
| · | One co-tenant can never, acting alone in his individual capacity, mortgage more than his own interest in property held in common with other parties. The mortgagee in such a mortgage may foreclose in the usual manner and circumstances, but the foreclosure being only of the undivided interest held as security; upon completion of foreclosure and no redemption, the mortgagee will succeed to the interest of mortgagor and become a tenant in common in his stead. |
| · | One co-tenant can never, acting alone in his individual capacity, impose or grant an easement on the entire commonly held property. One co-tenant can grant an easement binding his own interest in the common property but such will not create in the grantee rights against the other tenants in common. |
| · | Although most liens affecting the interest of one tenant in common will result only in a sale of that undivided interest certain federal court decisions have held that the United States may enforce a federal tax lien by a sale of the full fee simple title in which the delinquent taxpayer holds an undivided interest. By so doing, the United States may subject all the other owners of undivided interest to the foreclosure by notice and by providing in the judgment that their proportionate part of the net proceeds of the foreclosure sale is to be paid over the whole, in the sense that the co-tenants part cannot be divided from the whole. The government may subject the whole property to sale with proportionate reimbursement to the other co-tenants. |
19.12.3
Title Insurance Considerations
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| If only a percentage interest of a tenancy in common is to be insured in one or more but not all of the tenants: |
| · | The policy should specify the source of title substantially as follows: A and B as to undivided 60% interest as tenants in common, such interest having been derived by deed dated _________________, from _________________________, recorded ______________ in Book ________, Page _____, in the Recorder’s Office for _________________ County, ________________________. |
| · | Any federal tax lien against any other co-tenant must be shown as an exception in Schedule B since a lien against one co-tenant’s interest may affect all the property. |