In the last chapter we discussed real property and personal property, distinguishing them in the easy case and the hard case.  In this chapter, we will turn to discussing ways in which land may be owned, and who may own it. Before we discuss different types of ownership, however, it is important to discuss the concept of “fee simple.”

First, it is useful to recall that the term “property” refers to a bundle of legal rights – a valuable right or interest in something, and the right to legally use or dispose of that thing, rather than simply a “thing.” Put another way, “property” not only means the “thing” itself, but any rights that come with ownership of the “thing.” Courts as lofty as the U.S. Supreme Court have highlighted that property consists of “the group of rights which the so-called owner exercises in his dominion of the physical thing,” such as “the right to possess, use and dispose of it.”^[1]

As you practice, you will often see the term “in fee simple” in documents and deeds. This phrase is a description of the rights inherent in total ownership of property. Learning the phrase and its meaning will be helpful now, and later, when we will be discussing rights related to leasing, co-owners, etc.

There are various types of ownership called “fee simple,” namely (1) fee simple absolute; (2) fee simple determinable; (3) fee simple subject to a condition subsequent; (4) fee simple subject to an executory limitation; and (5) fee simple conditional. Other than “fee simple absolute,” all the other types refer to ways in which an owner can lose ownership of land due to the occurrence of some event.  For purposes of this text, all you need to know is that any type of “fee simple” other than “absolute” means that the owner can lose ownership – otherwise, we will focus on “fee simple absolute.”

In Indiana law, “fee simple absolute” is usually just referred to as “fee simple,” and is defined as: “[t]he entire and absolute interest and property in land.”^[2] For instance, Black’s Law Dictionary states that “fee simple” means:

An absolute or fee- simple estate is one in which the owner is entitled to the entire property, with unconditional power of disposition during his life, and descending to his heirs and legal representatives upon his death intestate.[3]

[1] Phillips v. Washington Legal Found., 524 U.S. 156, 170 (1998)

[2] Alsman v. Walters, 184 Ind. 565, 106 N.E. 879, 880 (1914)

[3] Id.

Fee simple grants to the owner four rights in land. They consist of the right of disposition, the right of use, the right of possession, and the right of exclusion.

The right of disposition is as it sounds, namely the ability of the fee simple owner to sell and convey the property in question. As noted by another Indiana case: “A man is prohibited from violating the law of the land by his will, as fully as by his deed; but he is at liberty to dispose of his property as he pleases, if in so doing he violates no law.”^[1]

The second right inherent in fee simple absolute is the “right of use.” Similarly to the right of disposition, this right is simply the right to use the land as the owner wishes. In Indiana, cases have stated the right as follows:

An owner of land has the right to occupy and improve it in such manner and for such purposes as he may see fit including changing the surface or by erecting buildings thereon.^[2]

The third right inherent in fee simple absolute is called the “right of possession.” In essence, this means that the person with fee simple not only has ownership of the property, but the current right to be on the property. An Indiana case states:

[A]ppellants executed and delivered a warranty deed conveying to appellees the fee simple title of appellants to the real estate. At that point in the evidence, appellees stood with a prima facie good title to the real estate and the presumptive right of possession.^[3]

In other words, the person with fee simple absolute title is also presumed to be the person who has the right to be on the land.

Finally, the person with the right of possession is also the person with the right to eject others off the land; in other words, the “right of exclusion.” This means that the property owner may choose who to permit on the land and who to keep off the land. I apologize for the longish quote from this case, but it is very interesting:

One of the time-honored principles of property law is the absolute and unconditional right of private property owners to exclude from their domain those entering without permission. “[T]he proprietor of a theater, unlike a carrier of passengers, is engaged in a strictly private business. He is under no implied obligation to serve the public and ... is under no duty to admit everyone who may apply and be willing to pay for a ticket. This long-standing principle of property law has been frequently reaffirmed, subject only to statutorily imposed prohibitions on exclusions for characteristics such as race and religion.^[4]

With “fee simple” and its four characteristics in mind, we turn to looking at how property may be held by one or more people.

[1] McCray v. Lipp, 35 Ind. 116, 119 (1871)

[2] Long v. IVC Indus. Coatings, Inc., 908 N.E.2d 697, 702 (Ind. Ct. App. 2009)

[3] Pringle v. Broadstreet, 154 N.E.2d 413, 420 (Ind. Ct. App. 1958)

[4] Donovan v. Grand Victoria Casino & Resort, L.P., 934 N.E.2d 1111, 1113 (Ind. 2010) (internal citations omitted)

Sole ownership of land is ownership by one person or entity (such as a partnership or corporation). A person may receive ownership by deed from another person or from a group, as in the following case excerpt:

The appellee and seven others, who were tenants in common of the real estate described in the second paragraph of the complaint, conveyed to the Frankfort & Kokomo Railroad Company the right of way for a railroad across said real estate, and it is admitted that this deed was duly recorded. The company built the road and executed to other parties a mortgage on its track, right of way, and franchises. Subsequently the road was conveyed to and owned for a time by another company, and in June, 1886, the appellant became the owner by purchase at sheriff's sale under a decree of foreclosure of said mortgage. The appellee has become the sole owner of the fee simple by conveyances from her cotenants.^[1]

Be sure not to confuse “sole ownership” with “fee simple.” The term “fee simple” means that one has the four rights discussed above. “Sole ownership” means that only one person or entity has rights in the property, whether in “fee simple” or not.

[1] Toledo, St. L. & K. C. R. Co. v. Cosand, 6 Ind. App. 222, 33 N.E. 251, 252 (1893) (emphasis added)

In property law, you will see property held by more than one individual or entity referred to as “concurrent ownership” or “co-ownership.” In Indiana, “[t]here are three basic forms of concurrent ownership: joint tenancy, tenancy in common, and tenancy by the entirety. [T]o create a concurrent ownership interest in real property, there must be a conveyance or devise to two or more persons.”^[1]

Each of these basic forms of concurrent ownership has its own legal effect. They should be carefully distinguished in order to avoid potentially disastrous errors in property transfer and estate planning.

[1] Perez v. Gilbert, 586 N.E.2d 921, 924 (Ind. Ct. App. 1992)

The first form of joint ownership we will consider is tenancy in common. Black’s Law Dictionary defines “tenancy in common” as:

[W]here two or more hold the same land, with interests accruing under different titles, or accruing under the same title, but at different periods, or conferred by words of limitation importing that the grantees are to take in distinct shares.^[1]

Let me explain a bit further. In essence, tenants in common are two or more owners of a piece of real property who may obtain ownership at different times, from different people, and in different ownership amounts. Unless otherwise specified, when two or more people own a piece of land, the default in Indiana is tenancy in common.

In addition, while tenants in common may own different percentages of land, if there is no other evidence or indication, “there is a presumption that their shares are equal…[t]his presumption is rebuttable, however, and extrinsic evidence, such as contribution, can be shown to refute it.”^[2]

Another important aspect of tenancy in common to consider is that the owners have no “right of survivorship.” This means that, if one co-owner dies, that owner’s percentage is transferred to the owner’s heirs, rather than to other co-owners.

Tenants in common also have certain rights as to each other and to third-party non-owners. As noted in a U.S. Supreme Court case:

Tenants in common may each unilaterally alienate their shares through sale or gift or place encumbrances upon these shares. They also have the power to pass these shares to their heirs upon death. Tenants in common have many other rights in the property, including the right to use the property, to exclude third parties from it, and to receive a portion of any income produced from it.^[3]

[1] Id.

[2] Willett v. Clark, 542 N.E.2d 1354, 1358 (Ind. Ct. App. 1989)

[3] United States v. Craft, 535 U.S. 274, 280, 122 S. Ct. 1414, 1421, 152 L. Ed. 2d 437 (2002)

Unlike tenancy in common, joint tenancy is more strict in how the owners take possession of the property. The following case sets forth the requirements to create a joint tenancy:

Four requisites must exist to constitute a joint tenancy: (1) the tenants must have one and the same interest; (2) the interests must accrue by one and the same conveyance; (3) the interests must commence at one and the same time; and (4) the property must be held by one and the same undivided possession.^[1]

In addition, there is one other requirement set forth in Indiana Code § 32-1-2-7, which requires that the desire to create a joint tenancy be set forth explicitly in the document transferring ownership of the property, usually a deed of some sort.

There are several aspects of a joint tenancy which differentiate it from a tenancy in common. First, each joint tenant has an undivided and equal ownership interest in the property. Second, each joint tenant has a right of survivorship – that is, if another joint tenant dies without disposing of the tenant’s interest in some way, the other joint tenants take the deceased’s share in equal ownership. Third, and this is not if one joint tenant conveys during the life of that tenant, it destroys the joint tenancy, as stated in this excerpt:

It is well settled that a conveyance of his interest by one joint tenant during his lifetime operates as a severance of the joint tenancy as to the interest so conveyed, and destroys the right of survivorship in the other joint tenants as to the part so conveyed.^[2]

[1] Poulson v. Poulson, 691 N.E.2d 504, 506 (Ind. Ct. App. 1998)

[2] Morgan v. Catherwood, 95 Ind. App. 266, 167 N.E. 618, 622 (1929)

Tenancy by the entirety (or, tenancy by the entireties) is a special form of joint tenancy available only to husband and wife similar in many aspects to joint tenancy. For example:

The most notable aspect of tenancy by the entirety is that upon the death of one tenant, the surviving tenant takes possession of the whole—the so-called right of survivorship. In fact, tenancy by the entirety is a special form of joint tenancy, i.e., one that can exist between only husband and wife. Common to both is the right of survivorship.^[1]

With that said, there are aspects of tenancy by the entireties that differentiate it from tenancy in common and joint tenancy. One important difference is the difference in presumption:

Where the deed conveying property to a husband and wife contains no qualifying words, the grantees take and hold the estate as tenants by the entirety. This is so even where the husband and wife are not designated as such in the deed. However, a husband and wife may take real estate as joint tenants or tenants in common, if…that intention is clearly expressed in the deed or will.^[2]

There is one other major difference between a joint tenancy and a tenancy by the entirety. In Indiana:

The law in this State is clear that property held in a tenancy by the entireties is held by a single legal entity created by the fiction of the unity of husband and wife. It is similarly well settled that one spouse cannot convey or encumber the property so held without the consent of the other.^[3]

Both spouses must consent to a transfer, and it is not enough that one claims the ability to act for the other, since “the marriage relationship alone does not establish the relation of principal and agent between husband and wife.”^[4]

Therefore, each spouse is somewhat protected by the inability of the other to (for instance) suddenly sell the property to a third person without consent of the other spouse.

Finally, to reiterate, when one spouse dies, the other spouse automatically becomes sole owner of the property in question, without any further estate or legal action taken. As noted by an Indiana case:

An essential trait of this tenancy is that it “devolves upon the surviving spouse the ownership of the property in real estate, free and clear of the individual indebtedness of the other spouse.” When one spouse dies, the survivor, “being already seized of the whole, can acquire no new or additional interest” due to the survivorship. Rather, the survivor “holds the entire estate, not by virtue of any right which he acquires as survivor, but by virtue of the original grant.”[5]

[1] Powell v. Estate of Powell, No. 88A01-1402-PL-59, 2014 WL 2988174 (Ind. Ct. App. July 3, 2014)

[2] Ramer v. Smith, 896 N.E.2d 563, 567 (Ind. Ct. App. 2008) (internal citations omitted)

[3] State Dep't of State Revenue, Inheritance Tax Div. v. Union Bank & Trust Co., 177 Ind. App. 632, 634, 380 N.E.2d 1279, 1280 (1978)

[4] Heffner v. White, 113 Ind. App. 296, 45 N.E.2d 342, 346 (1942)

[5] Flatrock River Lodge v. Stout, 130 N.E.3d 96, 100 (Ind. Ct. App. 2019)

Business ownership of property is a unique animal. Given the variety of business entities recognized in Indiana, this has created a myriad of different situations involving ownership of business. For the remainder of this chapter, we will look at different entities and their ownership of property. Because of the importance of differentiating among different types of business in this regard, each section will also discuss the nature of the business in question.

The partnership is a well-known and long-standing business association. In modern times, they are well regulated and mostly uniform across the states. Indiana has adopted what is called the “Uniform Partnership Act,” which is a statute regulating all aspects of Indiana partnerships.

According to Indiana statute, a partnership is “[A]n association of two (2) or more persons to carry on as co-owners a business for profit and includes for all purposes of the laws of this state a limited liability partnership.”^[1] Moreover, there is a legal test for determining whether two or more people have formed a partnership, namely:

There must be: (1) a voluntary contract of association for the purpose of sharing profits and losses, which may arise from the use of capital, labor, or skill in a common enterprise; and (2) an intention on the part of the parties to form a partnership.^[2]

Pursuant to the same statute, “[a]ny estate in real property may be acquired in the partnership name. Title so acquired can be conveyed only in the partnership name.”[3] It is important to note that, when a partner dies, the heirs of that partner are not entitled to receive a share of any real property as a co-owner – the real property remains in the possession of the partnership. Indiana law states:

When any partner retires or dies, and the business is continued …without any settlement of accounts as between him or his estate and the person or partnership continuing the business, unless otherwise agreed, he or his legal representative as against such persons or partnership may have the value of his interest at the date of dissolution ascertained and shall receive as an ordinary creditor an amount equal to the value of his interest in the dissolved partnership with interest.^[4]

Even if the partnership “winds up” after the death of a partner, the heirs of the deceased partner do not necessarily take ownership interest in land, because “Where a partnership is dissolved, its debts paid, and its affairs would up, undistributed partnership property belongs to the former partners as joint tenants or tenants in common.”^[5]

[1] Curves for Women Angola v. Flying Cat, LLC, 983 N.E.2d 629, 632 (Ind. Ct. App. 2013), citing Indiana Code § 23-4-1-7

[2] Copenhaver v. Lister, 852 N.E.2d 50, 58-59 (Ind. Ct. App. 2006) (internal citations omitted)

[3] Ind. Code § 23-4-1-8

[4] Indiana Code § 23-4-1-42

[5] Engelking v. Estate of Engelking, 686 N.E.2d 932, 934 (Ind. Ct. App. 1997)

The second broad type of business entity classification are the “incorporated” entities, such as corporations and limited liability companies (or “LLCs”). Indiana law states that:

A corporation is an artificial and independent legal entity with an existence separate and distinct from its shareholders and officers. It is this difference between an independent legal entity deriving its existence from statutory authority versus an aggregate of individuals which distinguishes a corporation from an unincorporated association.^[1]

A corporation has the power to “sell, convey, mortgage, pledge, lease, exchange, and otherwise dispose of all or any part of its property,” including real property.^[2] The same is true of LLCs.^[3]

An LLC owns the property in sole ownership unless it shares interest with another individual or corporation.

[1] Benevolent & Protective Order of Elks Local 291 v. Mooney, 666 N.E.2d 970, 972 (Ind. Ct. App. 1996)

[2] Ind. Code § 23-1-22-2(4) – (5)

[3] Ind. Code § 23-18-2-2(4) – (5).

We will discuss leases, which are considered a form of ownership, in a later chapter. However, there is one other type of ownership we should consider in this chapter, namely the “life estate.” This is a type of ownership where the person who receives a deed to a property will own it for a certain time, called the measuring life, only. Then the ownership will pass automatically to another.

Usually, a life estate is established with a deed, similarly to tenancy in common, joint tenancy, etc. A life estate, as with many of these other estates, is defined statutorily, as set forth in Indiana Code § 32-17-2-3:

An estate for life: (1) may be created in a term of years with or without the intervention of a precedent estate; and (2) a remainder may be limited on the estate for life.^[1]

In practice, the creation of a life estate almost always uses language in the deed like the following: “John Smith conveys the following property to Joan Smith, for her life, then to her children from our marriage, in fee simple.” In essence, Joan Smith gets to the use the property in question during her life. I should note that the “during her life” could actually be “during [any person’s] life”, so that the land could be held by Joan during: “Barack Obama’s life,” “George W. Bush’s life”, “Bill Gates’ life” or any number of others, limited only by the idea that the person must actually be alive at the time the deed is executed.  In addition, life estates may be “stacked,” meaning that the property could be “to X for life, then to Y for life, then to Z for life, then finally to Joan Smith, in fee simple.”

This may, of course, create some problems. Perhaps Joan Smith is a miser who refuses to do any repairs to the property during her time there, and so the property is devalued more than normal wear and tear due to her keeping sheep in the living room. Therefore, John and Joan’s children receive a piece of property not nearly what it should have been worth (and may be tempted to sue mom or mom’s estate). When a life tenant damages, fails to upkeep, or (strangely) repairs or improves a property, some variety of waste has occurred. The future owners of the property may therefore take steps to prevent waste, as may be seen in the following case:

Defendant took possession of said tract of land…has the same now under her full control, subject to the rights and equities of this plaintiff….defendant, within the last two years…has cut down, hauled off and sold from off said land a large number of walnut, poplar and other timber trees growing on said lands…and during said time she has also committed waste on said land in other ways, all of which has been to the irreparable injury to the fee simple of said lands, producing great injury to this plaintiff. The complaint shows the cutting and removal, and the threats to cut and remove, valuable growing timber, to the irreparable injury of the fee simple estate, and to the plaintiff as the owner thereof, which clearly makes a case of actionable waste, and for injunction.^[2]

Waste is typically divided into “voluntary or active” and “permissive or passive” waste. The difference between the two is:

Waste is classified as voluntary or actual (sometimes called commissive), and permissive or negligent waste. Voluntary waste may be done by such acts as destroying, altering, or removing buildings, or cutting down timber trees. The failure of the tenant to exercise the ordinary care of a prudent man for the preservation and protection of the estate is permissive waste.^[3]

A rarer case is where the life tenant makes actual improvement to the property that result in increase in value, but also increase the burden (such as tax increase on the land) on the property. While in some states, the fee simple owner can prevent the life tenant from committing ameliorative waste, in Indiana, the test is whether the value to the land has been reduced overall.^[4]

So, to summarize, while the life estate owner has many of the benefit of full ownership of the property (e.g., fee simple), he or she is limited in some ways as to what can be done to, and with, the property. And, while a fee simple owner is free to let the property fall down around his or her ears, the life estate owner has certain duties of upkeep to the property to the remainder owners.

[1] Ind. Code § 32-17-2-3(b).

[2] Robertson v. Meadors, 73 Ind. 43, 45 (1880)

[3] Jowdy v. Guerin, 10 Ariz. App. 205, 208, 457 P.2d 745, 748 (1969) citing 56 Am. Jur. Waste, § 4.

[4] “Therefore, acts that enhance the value of the property are not waste, and the test for waste in Indiana is now the lessening of the value of the estate.” 5 Henry's Indiana Probate Law and Practice § 33.19 (2019)