Brion Costa, CCIM
New York Commercial Real Estate Values

A Guide to the Different Types of Property Ownership

Discover the pros & cons of the different types of property ownership - make an informed choice before investing in real estate.
Brion Costa
January 27, 2024
Commercial Real Estate Legal Real Estate News

In the dynamic world of commercial real estate, understanding the different types of property ownership is crucial to making informed investment decisions. As a Certified Commercial Investment Member (CCIM), I have navigated the complexities of real estate investments and observed how the choice of property ownership can significantly impact the success of an investment. This guide aims to provide a comprehensive overview of the different types of property ownership, highlighting their advantages and drawbacks, to help you make a well-informed decision.

Pros and Cons of Freehold Ownership

Freehold ownership represents the most absolute type of property ownership. As a freeholder, you own the property and the land on which it stands indefinitely.

Pros
  • Complete Control: 
    You have full control over the property, allowing you to modify, renovate, or rebuild as you see fit, subject to legal regulations.
  • Value Appreciation:
    Freehold properties typically appreciate in value over time, making them a sound long-term investment.
  • No Lease Expiry:
    Unlike leasehold, there’s no worry about a lease running out.
Cons
  • Financial Commitment:
    The initial costs can be substantial, including the purchase price, taxes, and maintenance costs.
  • Maintenance Responsibility:
    All maintenance and repair responsibilities fall on you, which can be costly and time-consuming.

Pros and Cons of Leasehold Ownership

Leasehold ownership means you own the property for a set period as stated in the lease agreement but not the land it stands on.

Pros
  • Lower Initial Cost:
    Usually cheaper than buying freehold.
  • Flexibility:
    Suitable for those who cannot commit to a location long-term.
Cons
  • Lease Expiry:
    Once the lease expires, the property reverts to the freeholder.
  • Limited Control:
    Restrictions on what changes can be made to the property.

Pros and Cons of Joint Tenancy Ownership

Joint tenancy is common among married couples, where property is owned by two or more parties.

Pros
  • Right of Survivorship:
    If one owner dies, ownership automatically passes to the surviving owner(s).
  • Shared Financial Burden:
    Costs are shared, making it more affordable.
Cons
  • Potential for Conflict:
    Disagreements can arise, especially if one party wants to sell.
  • Equal Liability:
    All tenants are equally liable for debt and legal actions.
Matthew Benoit | Dreamstime.com

PHOTO: Matthew Benoit | Dreamstime.com

The Pros and Cons of Tenancy in Common Ownership

Tenancy in common allows individuals to own a property jointly, with each owning a specific share.

Pros
  • Individual Ownership Proportions:
    Each owner can hold a different percentage of the property.
  • Estate Planning Flexibility:
    Shares can be bequeathed to heirs.
Cons
  • Management Complexities:
    Decision-making can be complicated, especially in larger groups.
  • Potential for Disagreement:
    Conflicts can arise over property management or sale.

Pros and Cons of Community Property Ownership

Community property is a form of ownership by married couples where the property acquired during the marriage is owned jointly.

Pros
  • Equal Ownership:
    Each spouse has an equal interest in the property.
  • Survivorship Rights:
    In some states, property automatically transfers to the surviving spouse.
Cons
  • Division Challenges:
    Complications can arise during divorce proceedings.
  • Joint Liability:
    Both spouses are liable for debts related to the property.

NOTE: It should be noted here that California, among other states, is what is known as a "Community Property State". What this means is that any property or debt that is acquired during a marriage or domestic partnership is considered the property of the community, the husband and wife or partners equally, not the individual.

Pros and Cons of Co-Ownership

Photo 136890295 © Lane Erickson | Dreamstime.com

PHOTO: Lane Erickson | Dreamstime.com

Among the different types of property ownership, Co-ownership is when two or more individuals own property together, either as joint tenants, tenants in common, or in other arrangements.

Pros
  • Shared Costs:
    Financial burdens like mortgage payments are shared.
  • Investment Opportunities:
    Allows individuals to invest in property that might otherwise be unaffordable.
Cons
  • Shared Liability:
    All owners are responsible for debts and legal matters.
  • Disputes:
    Conflicts can occur over property use, maintenance, or sale.

Out of all the different types of property ownership, choosing the right one is a decision that carries significant future ramifications. It's essential to weigh the pros and cons of each ownership type in light of your investment goals and personal circumstances. 
As a seasoned CCIM, I strongly recommend seeking professional advice tailored to your specific situation. My expertise in commercial real estate investments can guide you through the complexities of property ownership. Feel free to reach out to me for personalized advice and assistance in crafting your real estate investment strategy.

Brion Costa, CCIM

Century 21, Commercial

626-695-7385

DRE#: 00939864

?Tags: commercial real estate investments Title
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