What Does Vesting Mean?

It’s so great to see you all again, we hope that you’re enjoying this series and learning a lot from these quick videos. Today we’re brining you another subject that often confuses some of our realtors.

To put it simply, “vesting” is a term we use to describe how people take title to their property. For example, if you buy a property by yourself and you are a single person, the vesting deed (the deed going into you a the new owner) will identify you, the grantee, as a single person. This means that your title is vested in you individually. 

You can also vest title “in common” and there’s a couple of different ways to do that.

First of all, if you buy property with someone else, it is assumed that you are likely purchasing the property as “tenants in common”. That means that each of you owns an undivided percentage of the property. So if you and two of your friends buy a property as tenants in common, that means that each of you owns 1/3 of the property. If one of these owners passes away, that person’s heirs will inherit their 1/3 stake. In this scenario, that 1/3 can also be sold separately. This is the tenancy in common.

Some tenancies in common also have what is called a “right of survivorship”. In our scenario, if one of the three people that own the property together dies, then the two people that are still alive then get that portion of the person’s property, meaning that they will each then own 50%. Many times, you will see close couples purchase a property together with rights of survivorship. Essentially, they want to make sure that if something happens to them, the other couple receives the property and not their heirs.

Another type of common tenancy that is unique to Florida and only a few other states is called “tenancy by the entireties”. It’s a legal fiction in Florida that two people that are married are considered to be one person. The reason that matters is that if there is a judgement against you individually, it can never attach to the property you own with your spouse as a tenancy by the entirety. The tenancy by entirety has the survivorship function mentioned above, meaning that if one of the spouses dies, the other spouse will then own the property outright. This means it has both the survivorship function and that special function of creditor protection.

How your clients are taking title is very important. It becomes more important, obviously, when you have several people purchasing the property together. Your title company is generally going to assume that multiple tenants are buying as tenants in common without the survivorship feature. So you really need to work with the title company and let them know how title is being taken.

If you have any questions about vesting issues or anything at all that we can be of help with, we can be reached at: 352-394-7408.