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What Protections does Tenants by the Entirety Ownership Provide?

There are three ways for co-owners of real estate to own property: as tenants in common, as joint tenants or as tenants by the entirety.

Tenants in Common vs. Joint Tenants

The main difference between tenants in common and joint tenants is what happens when one of the owners dies. When a tenant in common owner dies, their interest passes to their estate. When a joint tenant dies, their interest passes automatically to the surviving joint owner (or owners). This is why the latter is often referred to as “joint tenancy with rights of survivorship,” but you don’t need the extra words to achieve the same result.

Another difference between tenants in common and joint tenants is that tenants in common do not have to own equal shares. For instance, one could have an 80% interest in the property and the other 20%. Joint tenants must have equal shares.

Under Massachusetts law (M.G.L. Ch. 184, Sec. 7), if the deed doesn’t say that the ownership joint or with rights of survivorship, it will be deemed to be a tenancy in common.

Tenancy by the Entirety

A tenancy by the entirety is a form of joint tenancy reserved to married couples. The main difference is that it provides a certain amount of creditor protection to both spouses. One spouse’s interest is not subject to claims by creditors of the other spouse as long as it remains the principal residence of the nondebtor spouse (M.G. L. c. 209, § 1). In addition, non-married co-owners can sell their interest to a third party or sue to partition the property, which is an action in court to order the property’s sale and the proceeds split among the owners. These options are not available to tenants by the entirety as long as they remain married.

Under Massachusetts law, even if the co-owners are married, if the deed doesn’t contain the magic words “tenants by the entirety” the ownership will be deemed to be a tenancy in common or joint tenancy, as the case may be.

Real World Application

But what protections does a tenancy by the entirety really provide in the real world? We have a partial answer to that question, at least in one situation, in the case of Double B Capital Group, LLC v. David Ellis, et al. (Mass. App. Ct. No. 21-P-1157, October 21, 2022). David and Kathleen Ellis purchased their home as tenants by the entirety in 1983. In 2004, David borrowed $200,000 from Citizens Bank. Only he signed the loan documents, but both David and Kathleen signed the mortgage securing the loan. The question before the court was whether Double B Capital (which appears to have succeeded to Citizens Bank’s interest) can foreclose against Kathleen as well as David since she did not borrow the money.

The answer, unfortunately for Kathleen (and David) is that it can. The Massachusetts Appeals Court cites the 1953 case of Perry v. Miller (330 Mass. 261) which holds that a married tenant by the entirety may pledge their interest even if they receive nothing in return. (Lawyers refer to this as receiving “no consideration.”) To quote the Supreme Judicial Court in that case, “A married woman may . . . become surety for her husband . . . and may give a valid mortgage of her separate estate to secure the payment by him of his indebtedness to the mortgagee although she has no interest in the debt.”

The Ellises argued that the Perry case was superseded by the enactment of M.G. L. c. 209, § 1, in 1980, which says: “The interest of a debtor spouse in property held as tenants by the entirety shall not be subject to seizure or execution by a creditor of such debtor spouse so long as such property is the principal residence of the nondebtor spouse.” In other words, they argue that as long as Kathleen continues to live in the house her interest cannot be subject to foreclosure.

The Appeals Court disagrees, holding that Kathleen’s signing of the mortgage to Citizens Bank put her interest at risk:

The critical fact here is that Kathleen signed the mortgage conveyance. [Citation omitted.]. As to the mortgaged property, Kathleen is not a “nondebtor spouse” for purposes of the statute, nor did Citizens, N.A. “execute” upon the property when it foreclosed.[5] The Ellises’ mortgage of the property effected a valid transfer of legal title to Citizens, leaving the Ellises with only the equity of redemption.

Conclusion

The upshot of this ruling is that a tenancy by the entirety will probably provide no protection in cases of money borrowed on property since the lender will require that both owners sign the mortgage. But it can still offer protection from other debts incurred solely by one spouse.

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