Taking Title in Vermont: Exploring the Differences Between Various Forms of Ownership

There are have always been three methods of taking title to real estate in Vermont: “tenants in common,” “tenancy by the entirety” and “joint tenancy with the right of survivorship.” Recently the Legislature passed legislation allowing “civil unions” which, essentially, created a fourth type of title, “partners to a civil union.” There always seems to be confusion when people are confronted with choosing the best way to hold title to real estate. This article should impart some general knowledge about the subject.

Tenancy By The Entirety — A tenancy by the entirety is a particular method of ownership that is available only to husbands and wives, at least in Vermont. A title held as a tenancy by the entirety cannot be conveyed without the consent of both of the titleholders. A creditor of one of the titleholders cannot reach that asset; only a creditor of both the husband and wife can attach the property. (Recently this rule has been chipped away some by the IRS but it still applies to everybody else).

Joint Tenancy With The Right Of Survivorship — This method of ownership provides that in the event of the death of any one of the titleholders, the title automatically and without the need for probate, passes to the surviving owners. There is no need to record a deed or to do any probate or title work whatsoever with the exception of recording a certified copy of the death certificate in the town land records. Even this act is not necessary as it merely confirms the passage of title into the surviving owners and would not need to be done until it was time to convey on to someone else. Any joint tenant can sell his interest without the consent of the other joint tenants. A joint tenant could effect a straw conveyance of his interest to a third party thus breaking the joint tenancy at least as to that joint tenant. A joint tenant’s interest could theoretically be mortgaged without the consent of the other joint tenants although it would be very difficult to persuade a commercial lender to accept a mortgage on less than an entire interest in a piece of real estate. In practice, it is also difficult to sell such an interest to a third party.

Tenancy In Common — A tenancy is common is similar to a joint tenancy in terms of the lack of consent needed by one co-owner to sell or mortgage his interest; the primary difference is that in a tenancy in common, title does not pass to the remaining owners when the death of one owner occurs. That owner’s ownership interest passes in accordance with the person’s will or, in the event that there is no will, according to state law. Typically a probate proceeding would be required to confirm title in any heirs. The death of an out of state owner of real estate typically requires two probate proceedings, one in the home state and one in the state in which the land is located.

Partners To A Civil Union — The proper language to create a civil union tenancy by the entirety is “to A and B, partners to a civil union.” This language creates, by statute now, a tenancy by the entirety subject to all the rules outlined above. The law is too unsettled to determine what the effect of any civil union created somewhere else would be upon the ownership of Vermont property.