Legal Definitions - Ownership in common

Ownership in common is a legal arrangement where two or more individuals share ownership of a property, but each owner holds a distinct, separate interest. Unlike some other forms of co-ownership, an owner's share is considered their individual asset that they can sell, mortgage, or bequeath independently. This means that if an owner passes away, their specific share does not automatically transfer to the surviving co-owners. Instead, it becomes part of their estate and is passed on to their designated heirs or beneficiaries, according to their will or the laws of inheritance.

Here are some examples to illustrate ownership in common:

• Investment Property: Sarah, Mark, and Emily decide to purchase a commercial building together as an investment. They agree to hold the property as ownership in common, with each owning a one-third interest. If Mark unexpectedly passes away, his one-third share of the building does not automatically go to Sarah and Emily. Instead, Mark's share becomes part of his estate and will be inherited by his children, as specified in his will. Sarah and Emily would then co-own the building with Mark's children.

  This example illustrates ownership in common because each co-owner's interest is distinct and can be passed on to their heirs, rather than automatically transferring to the surviving co-owners upon death.

• Family Vacation Home: A brother and sister, David and Lisa, inherit a family vacation home from their parents. They decide to keep it and hold title as ownership in common. David owns 60% and Lisa owns 40%. Years later, Lisa passes away. Her 40% interest in the vacation home does not automatically revert to David. Instead, Lisa's share is distributed to her spouse and children, as per her estate plan. David now co-owns the vacation home with Lisa's heirs.

  This example demonstrates ownership in common by showing how unequal shares can exist and how a deceased owner's interest is inherited by their beneficiaries, maintaining their family's stake in the property.

• Small Business Assets: Three partners, Alex, Ben, and Chloe, start a graphic design firm. They jointly acquire various business assets, including specialized software licenses, office equipment, and client contracts, holding them as ownership in common. If Ben decides to retire and sell his interest in the business assets, he is free to do so without needing permission from Alex and Chloe, as his share is distinct. If he were to pass away, his share of the business assets would go to his heirs, not automatically to Alex and Chloe.

  This example highlights ownership in common in a business context, showing that individual shares in assets are divisible and transferable, and upon death, they pass to the owner's estate rather than to the remaining partners.