Real estate can be owned in a variety of ways in Oregon.

The most common is called ownership in fee simple. Such an owner may also be referred to as the holder of a fee. This simply means that the person (or group or entity) owns the land, by him or herself, with no other person group or entity having an ownership right currently, or having a right to the land which will pass to them at some point in the future.

Even if one owns a fee simple, the property may still be subject to an easement which can restrict the use the owner can make of the property, or which can allow other people to use the property (for example, to access an adjoining parcel, to run utilities over, or the like). A fee simple can also be restricted by land use laws; zoning; or conditions, covenants and restrictions (CCRs).

There are a variety of ways in which different people can have non-concurrent interests in real estate.

For example, a person can also own a life estate, which is the right to use property during their lifetime (or during the lifetime of some other specific individual). If there is a life estate, the property will pass to what is called the remainderman upon the end of the life in question. The holder of the life estate has a duty not to allow the property to deteriorate, and must take appropriate steps to maintain the property.

In most cases, the creditors of a life estate holder cannot affect the title of the remainderman once the life in question has ended. There is one significant exception to this. If the life estate holder receives Medicaid or certain other government benefits, the government may be able to take the interest when the person dies. The government may also be able to restrict the person from giving or selling his or her interest during his or her life for less than the value that the government determines. The value that the government places on a life estate for these purposes is very high. For a 70 year old, for example, the government will value a life estate as being over 60% of the real market value of the real estate. Even for a 99 year old, the government will value a life estate at over 20% of the fair market value of the real estate.

A life estate can thus create significant difficulties for both the holder of the life estate, and the remainderman, if Medicaid or certain other government benefits ever become an issue.

Property can also be held pursuant to a lease. As with a life estate, a lease gives one person certain rights and duties now, but these rights and duties will move to another person (in this case, back to the owner), upon the expiration of the lease. A discussion of the rights and duties of lessees and lessors, and of the provisions that are often contained in a good lease is beyond the scope of this article.

A commercial lease will often be 20 to 30 pages long, and will carefully specify these duties. Sometimes the provisions of a commercial lease are surprising to a person who would like to lease property, as they may specify the hours and days when one must keep a shop open, or the kinds of signs one must use. Sometimes a commercial lease may have internal contradictions too, as some property owners construct their own leases, borrowing phrases or clauses from a variety of documents that are not compatible.

It is important that both lessors and lessees clearly understand what a lease requires of each, what their remedies are if the other side does not abide by their agreement, and what other options are available. Often, with the assistance of a good attorney, changes can be made to a proposed lease which will remove internal contradictions and/or which will allow both sides to reach a position where their needs and special circumstances are accommodated.

Property can also be held pursuant to a contract or other financing arrangement, such as a note and trust deed. Like a lease, in such cases the different parties have very strictly regulated rights and duties, and the actions (or inactions) of a party can create significant legal issues.

In some cases these issues can cost tens or hundreds of thousands of dollars. For example, if the actions of one party constitute a recision of a contract, a seller may be required to take back the property and refund the purchase price paid so far. On the other hand, if the actions of a party constitute a breach of a contract, this may allow the seller to take back the property and evict the buyer without refunding any money.

In addition to kinds of ownership where rights of possession are split for a time (as above), property can also be held by a variety of people at once, with each having current rights to the property.

Property can be held by a corporation, a limited liability corporation (LLC), a partnership, a limited liability partnership (LLP), and the like, for example. These forms of ownership may confer certain rights of use or duties of ownership on stockholders or members of corporations or partnerships.

Family vacation property, for example, is increasingly held by LLCs, with carefully thought out provisions as to which members can use the property when, what contributions to maintenance different members need to make, and to whom one can sell or pass on his or her membership.

Property can also be held by domestic partners, and/or by unrelated persons. Such holders are often referred to as tenants in common. Although the word “tenant” appears here, this has nothing to do with a lease or a rental agreement. It is simply the way the law in Oregon refers to what most people would call co-owners or joint owners.

It can be very helpful to have specific written agreements in many such cases. People should know, for example, that in many situations, all tenants in common have the right to enter and use the property, despite the difficulties this can create in practice, especially if the owners have a falling out with one another. People should also be aware of the complications which can emerge regarding duties to repair and maintain such co-owned property.

People should also be aware of the fact that, in most situations, tenants in common can force the partition or sale of property in which they hold a current ownership interest, even if the other owners do not want to divide the property, or do not want to sell the property. This can create considerable difficulties.

The holding of property by a husband and wife is usually very different from a tenancy in common. Such ownership by a husband and wife often carries with it certain unintended legal consequences. In addition to the legal consequences attendant on a divorce, it can make a difference whether the deed of a married couple says “husband and wife” or “tenants by the entirety.”

Tenancy by the entirety can restrict a husband or wife from selling his or her interest in the property without the consent of the other spouse, for example.

The words “husband and wife” may, in some circumstances, allow the property to be considered community property if the property was acquired using community property accumulated while the husband and wife lived in a community property state.

Community property receives a full step up in basis as of the date of death of the first spouse to pass on. For most people, this will not make much difference for a primary residence. It can make a considerable difference with regard to a vacation home or investment property, however. Capital gains tax is owed on the difference between the basis and the sale price when property is sold. The basis is usually the original purchase price. When one spouse has died, if the property is not community property, the property receives a step up in basis for only half of the value of the property. On the other hand, community property receives a full step up in basis on the death of the first spouse.

This means that if the surviving spouse wants to sell the vacation home shortly after the first spouse dies, she will pay no tax if the property was community property. On the other hand, if the property was held by husband and wife as tenants by the entirety, the surviving spouse will pay tax on half the increase that occurred since the property was purchased. For example, if a vacation home was purchased for $20,000, and is sold shortly after the death of the first spouse for $120,000, the surviving spouse would have to pay capital gains tax on $50,000 if the property is held as tenants by the entirety, but would have no capital gains tax if the property were community property.

A good attorney can be helpful in ensuring that such advantageous tax status is not lost. One way this can be done relates to another way of holding property, which is to place the property into a trust. If community property is placed in a specific trust, and not co-mingled with property that is accumulated later (including by investments of non-community property, inheritances, income earned in Oregon, or the like), it may be possible to preserve its character as community property even over a very long period of time. It can be very helpful, therefore, to have the assistance of an attorney who understands these issues as soon as a couple moves to Oregon from a community property state, before Oregon income and other factors complicate the situation.
Property can also be held by trustees for other reasons. For example, property is often held in trust for someone who is no longer able to manage their own affairs. Property can also he held by conservators on behalf of a protected or incompetent person or a child. There can be very significant duties and restrictions on trustees and conservators, particularly as regards real estate.

In many cases, trustees and/or conservators may be restricted from selling property without giving notices to a variety of persons, or obtaining the consent of the court. Trustees and conservators are also usually required to give fairly detailed annual reports or accountings to the person for whom they are holding property, and sometimes to a variety of other individuals. Conservators must also make such annual reports or accountings to the court.

A skilled attorney can help with these matters, arranging matters so that the greatest possible amount of protection is obtained, if this is desired, or arranging matters to limit the amount of continuing expense and reporting that is required, if this is the goal.

In some cases, with proper planning, a skilled attorney may even be able to eliminate or reduce the need for significant on-going expenses, reporting requirements, or the like, through the use of a well crafted power of attorney. This requires a person to come to see the attorney and make sure the necessary documents are in place while the person is still fully competent, however.

NOTE: The above touches on only some of the issues about which one should be aware in considering ways in which real estate can be held. There are many other possibilities, and many other considerations. The above should not be considered legal advice, nor should it be taken as a statement of the only time that one might benefit from consulting a legal or other professional.