Tenants in entirety compromised?

[chuckwow]

What is the name of your state (only U.S. law)?

Hawaii.

Aloha,

My wife and I are tenants in entirety on our property. This economic climate has made our primary residence too costly for us. It is also too large. We are considering renting the property out and moving into a smaller, more affordable accomadation. We understand this TIE code protects our home from bankrupsy, lawsuits etc. We are concerned that renting it out will essentially turn it into a business and remove the protecton of this code. Anyone have an opinion they can share on this topic? We thank you in advance!

 

[justalayman]

I find nothing that requires the property be your residence in order for it to be held as TIE. The only way to terminate a TIE is through death or a joint conveyance of the tenants.

I see nothing limiting properties held as TIE to only one parcel either.

 

[tranquility]

As a general rule, that would not destroy the tenancy. While I can't quickly find a case saying it isn't destroyed, I can find many which discuss the equitable allocation of rent in such a tenancy. That leads me to believe Hawaii follows the general rule.

 

[chuckwow]

Thanks so much for the replies,

Whether or not our property's equity will still be protected under this code is the only remaining factor in our decision to downsize and move to a lesser dwelling. Tough call, but we believe it is the responsible thing for us to do.

Thanks again and if anyone else has an opinion on this act, please know this is very important to us and we would love to hear it.

Aloha.

 

[HomeGuru]

What is the name of your state (only U.S. law)?

Hawaii.

Aloha,

My wife and I are tenants in entirety on our property. This economic climate has made our primary residence too costly for us. It is also too large. We are considering renting the property out and moving into a smaller, more affordable accomadation. We understand this TIE code protects our home from bankrupsy, lawsuits etc. We are concerned that renting it out will essentially turn it into a business and remove the protecton of this code. Anyone have an opinion they can share on this topic? We thank you in advance!

**A: TE alone does not protect your home from BK, lawsuits etc. And renting the property will turn it into a business and will trigger the GET.

 

[tranquility]

It does when only one party is getting sued or has to go BK. What do you mean by GET?

 

[chuckwow]

I assume HomeGuru is saying that renting the house out will "trigger" the need to pay general excise tax. Rather vague in his over-all reply: HG, are you saying, or suggesting, that renting the house out will void the protection the TE offers us? I do understand GET will have to be paid.

Tranquility: Thanks again, so...as long as a suit or BK does not involve both tenants, the property is protected? Makes sense to me.

 

[HomeGuru]

It does when only one party is getting sued or has to go BK.



**A: not exactly true. And here is the clafification. The TE exemption could be claimed provided that only one spouse files for BK and provided that there are no joint debts with the non filing spouse. So there are 2 parts to this.
Hawaii case law was used where one party filed BK but there was a joint debt. The BK Trustee moved to declare the asset non exempt and sold the real property owned in TE.


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What do you mean by GET?

**A: Hawaii General Excise Tax which is based on gross income and not net income. Depending upon which island the property is on, the tax could be 4% or (Oahu) 4.5%. This tax is commonly known as a rip off pyramid tax by Hawaii small business owners.

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To clarify the original question: renting the property will not change the TE status even if it is considered a business.

 

[HomeGuru]

I find nothing that requires the property be your residence in order for it to be held as TIE. The only way to terminate a TIE is through death or a joint conveyance of the tenants.

I see nothing limiting properties held as TIE to only one parcel either.

**A: two other ways to terminate TE: divorce or if one party transfers interest.

 

[HomeGuru]

I assume HomeGuru is saying that renting the house out will "trigger" the need to pay general excise tax. Rather vague in his over-all reply: HG, are you saying, or suggesting, that renting the house out will void the protection the TE offers us? I do understand GET will have to be paid.

**A: no that's not what I'm saying.

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Tranquility: Thanks again, so...as long as a suit or BK does not involve both tenants, the property is protected? Makes sense to me.

**A: OP have you lived in Hawaii for at least 2 years? If not, you will not be able to claim the state law exemption.

 

[ecmst12]

I would suggest that you hire a lawyer before you start renting, to help you construct your lease and give you some general advice about landlord-tenent law in your state, to help you avoid potential lawsuits from tenants.

 

[HomeGuru]

I would suggest that you hire a lawyer before you start renting, to help you construct your lease and give you some general advice about landlord-tenent law in your state, to help you avoid potential lawsuits from tenants.

**A: otherwise we may see more posts in the L/T forum.

 

[justalayman]

**A: two other ways to terminate TE: divorce or if one party transfers interest.

divorce, yes I did miss that but it was my understanding that one party could not transfer the property without the other agreeing.

 

[HomeGuru]

divorce, yes I did miss that but it was my understanding that one party could not transfer the property without the other agreeing.

**A: just look at JT, for TE is exactly the same except for married individuals. And a joint tenant could transfer their interest in the property and such act immediately turns the original tenancy in TC.
There have been cases whereby a wife in a second marriage transfers her TE interest to her kids prior to a divorce. What a mess.

 

[justalayman]

there are quite a few sites out there that are stating a TIE cannot be terminated by unilateral action.

okuralaw.com/tag/tenants-by-entirety/

One spouse cannot sell any part of the property without the signature of the other spouse.

Oahu Real Estate Hawaii Tenancy

Cannot convey without consent of spouse or other owner.

Tenants By The Entirety

. However, unlike JTWROS, neither party in a tenancy by the entirety has a unilateral right to sever the tenancy.

Of course none of that is anything official (statute or case law) but they are consistent in their position. Am I missing something?