The principle of vesting is an important tenet of property rights, and the application of the principle usually determines the owner's ability to use and profit from their personal property. As a result, vesting has important implications in real estate and the recording of real estate documents called title deeds. Homebuyers, sellers and realtors do well to understand deed vesting to protect their interests in a property transaction.
Vesting a deed means that the owner of the deed has absolute rights to the property and the property's title. It's a type of guarantee.
Basics of Vesting
Simply put, vesting is the legal term for assuming ownership and the rights that come with it. Owners with vested rights to a property are allowed to enjoy the rights entitled to a holder of real property, including the right to sell it. Under the law, a third party cannot take away a vested right from a property owner. In a real estate transaction, the title deed -- a document that conveys ownership -- that is enforceable is called the vesting deed.
Deed Vesting in Marriage and Business
When more than one owner is entitled to a property, all of its owners have a vested right to the property. While the manner of deed vesting varies from jurisdiction to jurisdiction, the most common cases of joint ownership come about through marriage or purchase partners.
In the case of marriage, both of the partners legally own the property completely in an arrangement known as "tenancy by the entirety," rather than a percentage of the property. A single person or legally registered business that purchases a property is also a tenancy by the entirety, though ownership in the business may not be.
Deed Vesting in Joint Ownership
In some cases of joint ownership, especially outside of marriage, two or more owners may be entitled to a percentage of the property by the conditions of the deed. In this situation, the owners are legally considered to be in a "tenancy in common." This arrangement is different from tenancy by the entirety because a percentage owner of a property -- called a co-tenant -- may sell their interest in the property independently of the other owners.
In real estate, the use of a property by its owner is sometimes restricted by terms written into its deed. These terms are usually called deed restrictions or covenants, and are recorded by the governing jurisdiction -- usually a county government -- along with the deed itself.
In court cases, the owners are restricted by the terms of the "last vesting deed," the immediately preceding and legally enforceable deed. This is true even if they have not reviewed the vesting deed before closing their purchase with a seller. Because the last vesting deed is the only enforceable title to a property, this document can restrict buyers whether or not they are aware of its terms at the time of purchase.
- Rocket Lawyer: What Is a Vesting Deed? Definition and How It Works
- Reference: What Is Vesting on a Warranty Deed?
- Thomas Rueters Practical Law: Vesting Deed
- The American College of Trust and Estate Counsel. "What Is Joint Tenancy and When Should I Use It?" Accessed April 10, 2020.
- Sacramento County Public Law Library. "Keeping Your House Out of Probate." Accessed April 10, 2020.
- Consumers Credit Union. "Avoiding Probate With a Transfer-on-Death Deed." Accessed April 10, 2020.
- IRS. "Frequently Asked Questions on Gift Taxes." Accessed April 10, 2020.
- IRS. "Estate Tax." Accessed April 10, 2020.
- Tax Foundation. "The Trade-Offs of Repealing Step-Up in Basis." Accessed April 10, 2020.
- American Academy of Estate Planning Attorneys. "Joint Tenancy and Medicaid Eligibility." Accessed April 10, 2020.
Matt Petryni has been writing since 2007. He was the environmental issues columnist at the "Oregon Daily Emerald" and has experience in environmental and land-use planning. Petryni holds a Bachelor of Science of planning, public policy and management from the University of Oregon.