Co-Ownership of Property in Texas

Topics Covered

Part One: Deeds Creating Co-Ownership
Part Two: Types of Tenancies
Part Three: Achieving Joint Tenancy (JTWROS)
Part Four: Adding Another Co-Owner to Title

PART ONE:
DEEDS CREATING CO-OWNERSHIP

Starting with the Contract

Buyers should carefully consider how co-ownership will be reflected in their deed. The deed is the sole document that evidences title and may also set forth significant agreements of the parties—including the type of co-ownership. For example, if buyers want to hold title as joint owners with rights of survivorship, (1) this requirement should be included in the contract before it is signed or (2) a special contract provision should be negotiated that approves specific JTWROS language to be included in the deed.

Requirements for a Texas Deed

Technical wording is not required in a Texas deed and that includes deeds intended to create co-ownership. “Words previously necessary at common law to transfer a fee simple estate are not necessary.” Prop. Code Sec. 5.001. If there is a signed written document that identifies a grantor and grantee, provides a reasonably accurate description of the property, and clearly contains the intention to convey, then that document is a deed under Texas law. Green v. Cannon, 33 S.W.3d 855,858 (Tex.App.—Houston [14th Dist.] 2000, pet. denied).

A deed must be in writing. “The parties should be named, the intent to convey property must be clear from the wording, the property must be sufficiently described, and the deed must be signed by the grantor and delivered to the grantee. Gordon v. W. Hous. Trees, Ltd., 352 S.W.3d 32 (Tex. App.—Houston [1st Dist.] 2011, no pet.). Additionally, a “valid conveyance of an interest in land must satisfy the requirements of both the statute of conveyances (Prop. Code Sec. 5.021) and the Statute of Frauds (Bus. & Com. Code Sec. 26.001).” ConocoPhillips Co. v. Hahn, 704 S.W.3d 515 (Tex. 2024).

General Warranty Deeds Versus Special Warranty Deeds

A general warranty deed expressly warrants the entire chain of title all the way back to the sovereign, and it binds the grantor to defend against title defects even if those defects were created prior to the grantor’s period of ownership. By contrast, in a special warranty deed, title is warranted only from the grantor and no further back than that. The grantor’s liability for title defects is therefore limited to his period of ownership up to and including conveyance to the grantee.

Either of these is permissible when adding a co-owner, as is a deed without any warranties at all. General warranty deeds predominate in conveyances of residential property while special warranty deeds are more often used in commercial transactions, although this is certainly not a hard-and-fast rule.

Fee Simple Interest

Deeds, including deeds to co-owners, can convey a wide range of property interests. It is presumed in Texas that a deed conveys fee simple title (the highest level of ownership) “unless the estate is limited by express words or unless a lesser estate is conveyed or devised by construction or operation of law.” Prop. Code Sec. 5.001. “An absolute or ‘fee simple’ estate is one entitling the owner to the [maximum] benefits of that estate during his life and descending to his heirs, devisees, and legal representatives on his death.” Jackson v. Wildflower Prod. Co., 505 S.W.3d 80, 88 (Tex.App.—Amarillo 2016, pet. denied).

Regardless of wording, a deed can only convey the interest that the grantor owns (or a lesser interest) but no more. This is true even if the deed purports to transfer a greater right or estate in the property. Prop. Code Sec. 5.003. Adding a co-owner to title is thus not an opportunity to expand the interest that the original owner possesses.

Reservations and Exceptions

Limitations on a co-owner’s interest are accomplished by reservations and exceptions contained in the deed. A reservation retains a certain interest in the grantor (e.g., the grantor keeps the minerals, an easement, or a life estate); by contrast, an exception stipulates that a certain interest is simply not conveyed at all, regardless of who may be the owner of it. Language reserving or excepting an interest must be clear and specific. Courts will not find reservations or exceptions by implication. Rahlek, Ltd. v. Wells, 587 S.W.3d 57 (Tex.App.—Eastland 2019, pet. denied).

“The primary distinction between a reservation and exception is that a reservation must always be in favor and [held back] for the benefit of the grantor; whereas an exception is a mere exclusion from the grant. . . .” Pich v. Lankford, 302 S.W.2D 645 (Tex. 1957).

Community Property Considerations

Texas is a community property state. The marital character of property (whether it is separate or community property) is fixed at the time of acquisition. It is good practice to indicate the marital status of the parties in a deed, including a deed intended to create co-ownership. Not doing so may cause a future title company to raise questions.

If a sole owner wants to make a spouse an equal owner, it is best to follow the person’s name with such language as “a married person and spouse of Grantor.” Ambiguity only results in the need for later clean-up or possible dispute resolution.

In Texas, neither the marital status of a grantor or grantee should be in doubt when title to real property is conveyed.

Presumption of Acceptance

When a grantor transfers property, title to the property vests in the grantee upon execution and delivery of the deed. Acceptance of the deed (and its terms, including co-ownership) is generally presumed pursuant to the common law doctrine of estoppel by deed, so the grantee’s signature is not usually required at real estate closings. However, if the deed specifies a certain type of co-ownership (or any other special conditions or agreements), it is never a mistake for the grantor to obtain the acknowledged signature of the new co-owner on the instrument. This removes all doubt as to undisputed acceptance of all stated terms.

Co-Ownership Deeds Prepared by a Title Company

Buyers should not expect that a title company will assist them with much customization of the warranty deed. More likely, the title company will refuse to allow or special provisions unless the contract (or a contract amendment) requires it. Otherwise, unless they agree otherwise, the parties will receive the usual minimalist title company document.

It is useful to recall that a title company is an insurance company acting on its own behalf. It is not there to advise or support the parties on what is best for them.

PART TWO:
TYPES OF CO-OWNERSHIP

When drafting a deed for co-owners, it is necessary to consider the type of co-ownership that will be established. In Texas, there are generally two: tenancy in common, which is presumed, and joint tenancy with rights of survivorship which must be created by written agreement, even between spouses.

Tenancy-in-Common (TIC)

If the goal achieve co-ownership but not provide for survivorship then one can convey the property directly out of the name of the existing owner into the names of both parties as co-owners. This results in tenancy-in-common, whether the co-grantees are married or not, and presumes a 50-50 undivided ownership interest. There is no provision for survivorship if either co-owner dies.

If two non-spouses are named as co-owners, and nothing more is said, they are considered to be tenants-in-common without rights of survivorship. Est. Code Sec. 101.002. In the case of non-spouses, when one co-owner dies the interest of the deceased co-owner goes directly to that person’s heirs, either by will or by intestate succession. The line of succession is vertical, downward to the heirs of the deceased, rather than horizontal, across to the co-owner.

“Under a tenancy in common, the deeded interest descends to the heirs and beneficiaries of the deceased cotenant and not to the surviving tenants. . . . [In the case of joint tenancy with rights of survivorship,] upon the death of one joint tenant, that tenant’s share in the property does not pass through [last will and testament] or the rules of intestate succession; rather, the remaining tenant or tenants automatically inherit [the interest of the deceased joint owner].”Wagenschein v. Ehlinger, 581 S.W.3d 851 (Tex.App.—Corpus Christi 2019, pet. denied).

An alternative is to use a percentage deed to convey a 50% percent interest to the other party, but this does not result in a single document reflecting both names.

Joint Tenancy with Rights of Survivorship (JTWROS)

JTWROS combines two distinct concepts:

(1) co-ownership of an undivided fee simple interest in and to the property; and

(2) automatic succession to sole ownership upon death of the other joint owner.

“Texas recognizes two types of co-tenancies which may be deeded: a tenancy in common and a joint tenancy [with rights of survivorship or JTWROS] . . . . Under a tenancy in common, the deeded interest descends to the heirs and beneficiaries of the deceased cotenant and not to the surviving tenants. . . . A joint tenancy, on the other hand, carries a right of survivorship . . . upon the death of one joint tenant, that tenant’s share in the property does not pass through will or the rules of intestate succession; rather, the remaining tenant or tenants automatically inherit it.” Wagenschein v. Ehlinger, 581 S.W.3d 851 (Tex.App.—Corpus Christi 2019, pet. denied).

JTWROS between Non-Spouses

As to non-spouses, Estates Code Section 111.001(a) applies. This section states that “two or more [unmarried] persons who hold an interest in property jointly may agree in writing that the interest of a joint owner who dies survives to the surviving joint owner or owners.” Accordingly, business partners or perhaps siblings may agree in writing to establish JTWROS.

JTWROS between Spouses

JTWROS comes up in two contexts, between spouses and non-spouses. In either case, it must be evidenced by a written agreement that conforms to minimum requirements of the Estates Code.

As to spouses, Estates Code Section 112.051 applies: “At any time, spouses may agree between themselves that all or part of their community property, then existing or to be acquired, becomes the property of the surviving spouse on the death of a spouse.” Section 112.052 further requires that such an agreement “must be in writing and signed by both spouses.”

So long as statutory requirements are met no action or intervention by a court of law is required (Est. Code Sec. 112.053)—which is the probate-avoidance goal most people have in mind when establishing JTWROS.

In the absence of JTWROS, does a surviving spouse inherit the entire interest in the home when the other dies? Not necessarily. It is first necessary to determine if the deceased spouse died testate (with a will) or intestate (without a will). If a spouse dies intestate, property automatically vests 100% in the surviving spouse only if the property is community property and the deceased had no children—or, if there are children, all of them are the result of the marriage between these two spouses (i.e., there are no children from a prior marriage). Est. Code Sec. 201.003. Accordingly, it may be a useful part of one’s estate plan to enter into a JTWROS agreement.

Alternatives to JTWROS

A living trust can achieve the objectives of JTWROS and more. It is designed to hold property (often the homestead) during the life of the trustor and, since the trust does not die, the beneficiaries automatically inherit their respective beneficial interests without legal action or the need for a probate court.

A transfer on death deed (TODD) is an uncomplicated, non-probate method of transferring title to real estate when the owner dies. The Texas Real Property Transfer on Death Act is found in Estates Code Section 114.051. It states that “An individual may transfer the individual’s interest in real property to one or more beneficiaries effective at the transferor’s death by a transfer on death deed . . . [that is recorded while the grantor is still living].”

A gift deed that is held in reserve—sometimes called a deed in the drawer—is another option. “The essential elements of a gift made during a grantor’s life are donative intent, delivery, and acceptance.” Gannon v. Baker, 830 S.W.2d 706 (Tex. App.—Houston [1st Dist.] 1992, writ denied). If, for example, a parent wants to insure that property is transferred to a child without probate or other difficulty then he or she can sign and deliver a deed that is held (unrecorded) until the parent’s death. This is an entirely legal method that has been used for ages.

Advisability of a Last Will

JTWROS is not intended to replace the broader scope of a last will and testament. “The legislature did not intend for [the JTWROS statute] to validate agreements allowing testamentary disposition of a person’s entire estate, including real property, without the requirements of a will or the formalities a will or the formalities of will execution.” Hibbler v. Knight, 735 S.W.2d 924 (Tex.App.—Houston [1st Dist.] 1987, writ ref’d n.r.e).

PART THREE:
ACHIEVING JOINT TENANCY

Co-Owners Can Convert From TIC to JTWROS

If property is currently held by two persons as tenants-in-common, they can convert ownership to joint tenancy by means of a survivorship agreement as provided in Estates Code Section 111.001(a) or Section 112.051 (depending on whether or not the property is community property). This agreement is a separate instrument from the warranty deed.

It is not mandatory that a JTWROS agreement be recorded, but in most cases this would be a good idea so the agreement should be drafted in recordable form.

Common Law Creation of JTWROS

Prior to adoption of the Estates Code in 2014, adding a JTWROS co-owner required that the owner transfer the property out to a third party (an attorney or another trusted individual) who then transferred the property back in to the two desired grantees with express JTWROS language.

Why this circuitous route? Because common law required that JTWROS be established at the inception of title.Doing so was part of the four unities of time, title, interest, and possession. At common law, in order to create JTWROS, all joint owners were required to receive their interest in the property at the same time; through the same legal document; with each having an equal and undivided ownership share; and with each having an equal right to possess and use the entire property.While these traditional criteria have been superseded by the Estates Code, they remain relevant in cases where there is ambiguity and judicial interpretation is required.

JTWROS: Means and Methods

JTWROS may be created by two methods:

(1) by means of a signed written agreement—not a deed, but a separate stand-alone agreement. The parties thus end up with two documents, a deed plus a written survivorship agreement.

(2) Alternatively, the co-owners may receive title directly into both names as co-grantees “as joint tenants with rights of survivorship and not as tenants-in-common.” The deed should go on to clearly declare that the parties intend to enter into a survivorship agreement pursuant to the Estates Code. So long as this occurs and both co-grantees execute the deed then the statutory requirements are satisfied. The deed becomes a contract as well as a conveyance. There is no need for a separate survivorship agreement.

PART FOUR:
ADDING ANOTHER CO-OWNER TO TITLE

New Deed Required

Adding another person’s name to a deed (title) in order to create co-ownership (whether TIC or JTWROS) involves the drafting of a new deed rather than an amendment to the existing deed. As in all transfers of real property, care must be taken to preserve a clear and valid chain of title. Since the deed creating joint ownership is a new instrument, all the usual types of ownership (as well as limitations thereon) are available.

Creating a new deed reflecting co-ownership should be distinguished from merely entering into a contract or agreement to do so. A deed (a conveyance) should be distinguished from a contract (a mere promise to convey). “A purchaser takes title to real property solely through a deed. An instrument that does not operate as a present conveyance of title to real property is a contract to convey rather than a deed.” Smith v. Davis, No. 12-12-00169-CV, 2013 WL 2424266 (Tex.App.—Tyler 2013, no pet.).

Liability of Added Co-Owner on an Existing Loan

Adding a co-owner does not result in the new co-owner becoming liable on existing debt that is secured by the property. Title and debt are distinct and severable concepts. Liability on a loan occurs only when one signs a note. If there is no signature on the note then there is no liability to the bank.

Similarly, if both co-owners have signed the note and one co-owner sells his or her ownership interest, the selling co-owner remains liable on the loan. That person signed the note and the lender has not yet issued a release, therefore personal liability continues regardless of what happens to title.