When two or more investors buy commercial property together, how they take title is a decision worth making on purpose, not by default. Let me explain the ways co-owners can hold property in Virginia and why the words on the deed matter.
Written by Adam L. Engel, Esq., Principal and real estate attorney at Prime Title & Escrow
Commercial property is often bought by a group, two partners, a family, or several investors pooling capital. The form of co-ownership they choose controls what happens to each owner’s share when they sell, when they die, and when their interests diverge. Virginia law has clear default rules, and the deed has to use the right language to achieve what the owners actually intend.
This is different from confirming an entity’s authority to sign, which I cover in my guide to closing as an entity. Here the question is how co-owners hold title among themselves.
Two or more owners can hold Virginia property as tenants in common, where each owns a transferable share that passes to their own heirs, or as joint tenants with right of survivorship, where a deceased owner’s share passes to the surviving owners. Virginia abolished automatic survivorship, so a deed creates survivorship only if it says so expressly. Many investor groups instead hold title in an entity. The right choice depends on the owners’ goals.
Tenancy in common, the default for investors
Tenancy in common is the most common way unrelated co-owners hold investment property. Each owner holds a distinct, transferable share, which does not have to be equal. One investor might own 60 percent and another 40 percent. Each owner can generally sell, mortgage, or leave their share by will independently of the others. When a tenant in common dies, their share passes to their own heirs or devisees, not automatically to the other owners. For many investor groups, that independence is the point.
Joint tenancy with right of survivorship
In a joint tenancy with right of survivorship, when one owner dies their interest passes automatically to the surviving owners rather than to the deceased owner’s heirs. This is often used by family members or partners who want the property to stay with the survivors. The important Virginia wrinkle is that survivorship is not automatic. Under Virginia Code Section 55.1-134, the old common law right of survivorship between joint owners was abolished, so a deceased joint owner’s share passes as if they were a tenant in common unless the deed expressly provides otherwise.
Because Virginia abolished automatic survivorship, the deed must clearly state that the owners take as joint tenants with the right of survivorship, or use equivalent language, to create it. Leaving those words out means the share passes to heirs instead of to the surviving owners. Getting the vesting language exactly right on the deed is part of what I confirm before recording.
Tenancy by the entirety for married owners
Married couples in Virginia have an additional option, tenancy by the entirety, governed by Virginia Code Section 55.1-136. It includes a right of survivorship and also offers a measure of protection from the separate creditors of one spouse. It is available only to spouses. One point worth noting for cross border investors is that West Virginia does not recognize tenancy by the entirety, so a married couple holding property on each side of the line may hold title differently in each state. I confirm the right form for the state where the property sits.
Holding title in an entity instead
Many investor groups do not take title in their individual names at all. Instead they form a limited liability company, a partnership, or another entity to own the property, and the co-ownership is governed by the entity’s agreement rather than by the deed. This is extremely common on commercial deals, and it shifts the key questions to entity authority and good standing, which I address in my guide to closing as an entity. Your own legal and tax advisors usually decide whether direct co-ownership or an entity fits your goals.
Why the choice affects a future sale
How you hold title today shapes a sale or a transfer later. If co-owners hold as tenants in common and one wants out, that owner can generally sell their share, and in a dispute a co-owner can ask a court to divide or sell the property through a partition. If they hold with survivorship, a death changes who owns the property without a probate of that share. When I take a deed showing co-owners, I confirm the vesting matches what the parties intend, because correcting it after the fact means another recorded document. I cover how the deed itself works in my guide to the deed and how ownership transfers.
Getting it right at closing
Co-ownership is a decision for you and your advisors, but executing it correctly on the deed is my job. Before recording, I make sure the names, the shares, and the survivorship or entity language all say what you mean them to say, so the title reflects your arrangement from day one. You can see the rest of what I handle on my commercial real estate services page.
Tell me how you and your co-owners intend to hold the property and I will make sure the deed and the title reflect it correctly before we record.
Get Your Free Quoteor call (703) 552-4155Frequently asked questions
What is the difference between tenancy in common and joint tenancy?
With tenancy in common, each owner holds a transferable share that passes to their own heirs when they die. With joint tenancy with right of survivorship, a deceased owner’s share passes automatically to the surviving owners. Tenancy in common is the common default for unrelated investors.
Does Virginia create survivorship automatically?
No. Under Virginia Code Section 55.1-134, the common law right of survivorship between joint owners was abolished. A deed creates survivorship only if it expressly states the owners take as joint tenants with the right of survivorship, or uses equivalent language. Otherwise a share passes to the owner’s heirs.
Can co-owners own unequal shares?
Yes. Tenants in common can hold unequal shares, such as 60 percent and 40 percent, and each share is generally transferable on its own. The deed should reflect the percentages the owners intend so the record is clear.
What is tenancy by the entirety?
It is a form of co-ownership available only to married couples in Virginia, under Virginia Code Section 55.1-136. It includes survivorship and offers some protection from the separate creditors of one spouse. West Virginia does not recognize tenancy by the entirety, which can matter for couples owning property in both states.
Should we hold title in our names or in an entity?
Many investor groups form a limited liability company or partnership to own commercial property, so the co-ownership is governed by the entity agreement rather than the deed. Whether direct co-ownership or an entity fits is a decision for your legal and tax advisors, based on liability and tax goals.
What happens if a co-owner wants to sell their share?
A tenant in common can generally sell their share independently. If co-owners cannot agree, one can ask a court to divide or sell the property through a partition action. How you hold title affects these options, which is why the vesting on the deed is worth setting intentionally.
This article is general information about commercial real estate closings in Virginia and West Virginia. It is not legal advice for your specific transaction, and your costs and requirements depend on your deal. Please confirm the details with me directly.