What Is Involved in the Joint Ownership of Land?

C. Mitchell

Joint ownership of land involves two or more people who share some rights or financial interests in a particular property. Most of the time, joint ownership of land is discussed in terms of real property, particularly home ownership. It can also apply to empty lots, however, as well as land used for business purposes. There are a number of ways of structuring joint ownership, each with different consequences and ramifications. All involve at least two distinct parties, however, each with some recognized ownership interest in the land.

Many couples utilize joint ownership mortgages to purchase a family home.
Many couples utilize joint ownership mortgages to purchase a family home.

Most joint land ownership scenarios fit within two main categories: land being purchased and land being inherited. Land is very expensive in most parts of the world. People looking to purchase land often join forces either with peers or with financial institutions to make the initial acquisition of land more achievable. Landowners frequently also use their wills to leave parcels of land to groups of people, usually children or siblings. Multiple people who inherit the same property are usually considered joint owners.

Structured equity sharing is often involved in the joint ownership of land.
Structured equity sharing is often involved in the joint ownership of land.

The specifics of joint ownership of land almost always depend on the structure of the instrument creating the relationship. Land ownership is a legal obligation in most places, and as such, a lot depends on precise wording. Initial land sale and mortgage documents must usually set out ownership rights specifically.

One of the most straightforward types of joint ownership of land happens when two or more people decide to purchase a plot of land together. A married couple purchasing a house is a good example. The owners each have access to the entire property, but they share ownership rights and responsibilities with each other. Depending on how the initial contracts are drawn up, this ownership can be divided equally or can be split into proportional shares.

People frequently also inherit land in this fashion. A father may leave the family home to all three of his children jointly, for instance. Sometimes the division between shared owners is equal, but sometimes it is not. A child who lives in the area might get an 80 percent interest, for example, while children who live abroad may take a 10 percent interest each.

In most cases, how joint ownership of land is structured does not impact the day-to-day enjoyment until one of the joint owners dies, alters the property, or wants to sell his or her interest. Different jurisdictions have different laws governing how joint tenants can divide up commonly owned property. In some cases, death automatically transfers the deceased’s interest to the remaining co-owners. Other times, even a fractional interest can be transferred in a will, or sold during life.

Structured equity sharing is often also involved in the joint ownership of land, particularly where homes or office buildings are concerned. In this situation, a purchaser seeks out a financial institution to co-purchase desired land. This is different from a joint mortgage in that the financial institution does not finance the purchase outright. Rather, the two parties enter into the land sale agreement as equal owners, each responsible for the other’s default.

An arrangement like this for single family housing is commonly known as a housing equity partnership (HEP). HEPs are popular in many places as a way of helping low income individuals build credit through home ownership without having to finance an entire mortgage or loan on their own. These instruments also help ease an owner's obligation in the event the house depreciates, as often happens during economic downturns.

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