All About Joint Property Ownership
Joint property ownership is a common arrangement in Alabama and across the United States. It generally means that two or more people own the same property, such as a home, business or investment. These individuals share the rights, responsibilities and liabilities associated with owning that property, whether it be in full or in part . The specific type of ownership arrangement—such as joint tenancy, tenancy by the entirety, community property or tenancy in common—will be defined in law and apply different sets of laws to govern how the property is managed, disposed of or transferred.
As with any property law issue, the failure to understand the law can limit rights or result in the unintended loss of property to creditors, or the transferral of property at an inopportune tax moment. Understanding how joint property laws work and how you may be affected can help to prevent these problems from arising.
What are The Different Kinds of Joint Property Ownership in Alabama
In Alabama, there are three types of joint property ownership that are recognized: Tenancy in common, Joint tenancy and Tenancy by the entirety.
With tenancy in common a number of co-tenants own undivided shares of the whole subject estate. The undivided shares are not required to be equal but can be specified as such in the deed. The joint owners have the right to possess the whole estate rather than a portion of it. The ownership interest of one tenant in common does not pass automatically to the other tenants on death and on death passes to the decedent’s heirs or beneficiaries. Whatever is received, it is owned free of the claims of the surviving co-tenant’s creditors. As mentioned the shares or percentages of ownership are not required to be equal and in fact can be separate and distinct percentages for each owner. As an example, if the percentages are 50% to A and 25% to B and 25% to C, then A shall receive a distribution of 50% when A dies, B shall receive a distribution of 25% when B dies and C shall receive a distribution of 25% when C dies. However, what happens to the share of A, B or C during the lifetime when they sell it will be explained next.
With joint tenancy the undivided interests are equal. Each co-tenant owns a share of the whole estate equal to the share of every other co-tenant. When one of the joint tenants dies his interest in the estate vests in the survivor and the decedent has no interest to pass. This is the principle of survivorship. Because the estate of a joint tenant is not inheritable no probate proceedings are necessary for the purpose of transferring the interest to the surviving co-tenant (who now owns 100% of the property). Jointly held money in a bank account constitutes joint tenancy. Thus the deceased owner’s interest simply belongs to the surviving owner.
Tenancy by the entirety is identical to joint tenancy except in Alabama it is restricted to the entirety of the husband and wife. This form of ownership was created in Alabama to avoid the legal institution of dower at common law. Under this right, a widow or widower was given a lawful life estate in one-third of the lands owned by the husband in his own right at the time of his death. If any mental or physical limitation existed at any time prior to the death of the husband, a widow’s dower could not be defeated. However, dower being alienable, assignable, descendable, or transferable would subject the land to claims of creditors. The modern statutes abolishing dower have created an estate by the entirety secured from these risks and heirs of both spouses are prevented from dissolving it.
Legal Obligations and Rights
Alabama follows general judicial principles to distinguish between separate property and property owned by more than one person.
Joint Ownership
When two or more owners are involved, the law will refer to a resulting "Fiduciary Duty" to one another. This means that no owner can receive assets without the other owner’s knowledge. In Alabama the law will make broad presumptions in favor of joint ownership. These presumptions can be overcome if the sole owner has made to joint-owner(s) for notice of the terms and conditions related to the property. If the notice has been given, the burden is on the joint-owner(s) to prove adequate notice by credible evidence.
Burden of Proof:
If you are making a claim that you are the true owner of property that has two or more owners, then you have the burden of making your case. Likewise in the event that you are a joint-owner that feels you are entitled to a larger share of the property you have the burden of proof in this instance as well. The facts involved in the property ownership situation will determine how Alabama courts rule in regards to a challenge to the ownership of a piece of property. The standard of proof that will be utilized is what is required to win a court case. This standard can be preponderance of evidence, clear and convincing evidence.
Right to Partition Requires Mitigating Circumstances
It is possible to request a Partition of Land. That is for a court to divide the land into multiple portions so that each owner has an individual section to do with as they choose. The burden of proof in this kind of motion is on the person making the allegation. The allegation will be challenged by the other owner who will be trying to prove that the partition is not necessary or feasible. There are two types of partition including a partition in kind and a partition by sale. The first option is favored by Alabama courts if it is possible to do so. A partition in kind is usually performed when there are less than five owners of the land in question. A partition by sale results from a necessity like to pay off the joint debts of the landowners. In these cases, the state usually sells the land and divides the funds among landowners. To determine whether there are grounds for a partition the judge will consider a few different issues:
Conclusions
Joint ownership can occur in any number of ways. The agreement can be verbal or written. It can be between families, businesses or even spouses. Joint ownership will carry the same rights and benefits as any other type of ownership in Alabama. All the owners will have fiduciary duty to each other. This means that all owners under the same property are obligated to disclose information pertinent to the estate. There is a lot to consider when it comes to joint ownership. The most important consideration is if the joint owners have made any agreements that should be honored by all parties.
Inheritance and Survivorship of Property
Upon the death of a property owner in Alabama, their rights and interests in the ownership of the property terminates. If they are the last or only owner, their interest passes to their heirs and/or devisees as determined by the laws of Alabama. If there is more than one owner of the property then the issue of who inherits the property turns on how the property was owned at the time of death and whether a right of survivorship exists.
Property passing through a will means that the decedent ‘left his house in a will’ and his heirs and/or devisees are going to attempt to collect it. With freedom of contract laws in Alabama, this is what all the fuss is about. Thirty-two years ago, the Legislature enacted the Alabama Uniform Principal and Income Act, which allows people to share the ownership of property jointly without implying that each owner necessarily owns an undivided fractional interest in the property. The Act provides that "any person owning property may provide for the mode of its partition, division or distribution during his life, at his death or thereafter, but a provision that if any interest in a life insurance policy passes to the decedent’s estate shall have the effect of designating the trust as the beneficiary." The Alabama law gives the property owner the ability to choose how their interest should be divided upon their death without triggering an unanticipated result.
For property held as joint tenants with rights of survivorship, most of it transfers to the surviving joint tenants at the death of the first owner. The exception is property held by a husband and wife that is also community property. Under Alabama law, jointly held property that is not considered by our laws to be community property goes to the surviving joint tenant(s). In that event, the existing owners of the property become the new owners directly upon the death of one of them.
How to Settle Disputes with Joint Owners
Disputes frequently arise over issues of joint property ownership, which can be triggered by any number of factors. Instead of simply selling the property to one or more of the owners, however, Alabama provides a structured process by which these disputes will be resolved by the courts. Commonly addressed issues include whether the property is to be developed or sold, who should bear the costs of maintenance and repairs, and how the proceeds of the sale are to be divided. These disputes fall under Alabama statute 40-7-1, which allows for an action to be brought against the opposing party in a partition. The partition may be filed in either the circuit court or circuit court in the county where the property is located, regardless of whether there is a dispute over ownership or whether that ownership is simply being transferred to another party. In the partition, the parties requesting the partition must plead a cause of action, alleging that they have an interest in the property that is separate from the others, that they are able to pay their portion of all costs related to the property, and that they are entitled to a judgment of partition based on the statutes involved. Additionally , it should specify whether a sale is sought and the terms of that sale. The action is then taken to the general term of the circuit court of that county, along with a true copy of the bill. Alternatively, the court has the power to refer the case to an early resolution sanction. This remedy is available when all parties have been notified, and is given in a trial without a jury. If necessary, the case can also be transferred to create several different hearings. In simpler actions, the case can be resolved based on the pleadings of the parties. However, partition is not without its protections. It cannot be obtained by simply binding a deed to court without notice to all of the defendants, and if the party petitioning for the partition has been in possession of the property for an extended period (often indicated as 20 years) prior to the other owner(s) coming to court, it cannot be partitioned without actually rendering a decision on the property based on the laws of limitation. However, in both partition and partition by sale cases, the party who purchases the land at the partition sale will not "prosecute an action … to recover the possession or title to the whole land mentioned in the pleadings … as long as the purchase money remains unpaid."
Effect of Divorce on Jointly-Owned Property
The division of property is a contentious issue for many divorcing couples. In Alabama, joint property is defined as any property owned by both spouses. It might have been purchased before the marriage, or it may have been given or inherited to one person but commingled with the marital assets, making it joint property. If there is joint property in the relationship, the divorce settlement considers it along with the other marital assets. The court, and accountants or real estate appraisers if needed, divide all the property equitably, which the law defines as fairly but not necessarily equally. The court will consider the income and needs of both parties, the health of each spouse and the length of the marriage when making the decision. Alabama splits property into two broad categories: marital and non-marital. Separate property owned prior to the marriage, such as a house, is typically considered non-marital. However, certain factors may force the court to deem the property marital. If one spouse used marital assets to renovate the home during the marriage, for example, then the increase in value may be considered marital. Likewise, if one spouse owned a business before the marriage, but began to share in it after the wedding, the growing business may be considered marital, even if a family member gifted it to one spouse prior to marriage. A family business whose increase in value is due to the effort of both spouses during the term of the marriage is also marital. The way each category is divided can be controlled in a prenuptial agreement. When a couple files for divorce, all joint property must be assigned to one partner or another, so that one person legally owns the asset. The asset might come with corresponding debt, such as a mortgage or line of credit. The settlement might also include payment for the share of the asset. For example, if the house is worth $150,000 and the mortgage has $100,000 remaining on it, the spouse keeping the property may pay half of the equity to the other spouse—$25,000.
Attorney Consultation and Resources
Recognizing the intricate legal issues surrounding joint property ownership in Alabama, it is of utmost importance to seek experienced guidance when faced with a dispute or uncertainty in rights. While this blog provides general information and insights into relevant statutes and common practices, it is not a substitute for personalized legal advice.
In Alabama, there are numerous law firms and lawyers experienced in real estate and property laws who can provide guidance. Many of these professionals can be found through The Alabama State Bar Association’s "Find a Lawyer" portal or similar online directories . Key areas to look for when choosing a lawyer include proficiency in real estate law, experience in handling joint property ownership matters, and a strong track record in litigation or dispute resolution, if necessary.
For those who cannot afford a private attorney, the Legal Services Alabama provides assistance in finding free or low-cost legal help. This organization also hosts a legal referral service that can be helpful.
Should you find yourself in a situation requiring immediate legal attention, the most prudent course of action would be to schedule a consultation with a qualified local lawyer. Never underestimate the value of competent legal advice.