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Tenancy In Common (TIC): A Flexible Form of Joint Ownership

Last updated 03/19/2024 by

SuperMoney Team

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Summary:
Tenancy in common (TIC) is a form of joint ownership that allows multiple individuals to own a property together. Each owner has a separate and distinct ownership interest in the property and can hold equal or unequal shares in it. Unlike joint tenancy, tenancy in common does not include an automatic right of survivorship, and each owner can pass their ownership interest to their heirs.
Investing in real estate can be a lucrative and rewarding experience, but it also requires careful planning and attention to detail. One of the key decisions that real estate investors and property owners need to make is how to hold the title to a property. There are several forms of joint ownership available, each with its own benefits and drawbacks.
In this post, we’ll explore one of the most popular forms of joint ownership: tenancy in common. We’ll define what tenancy in common is, how it works, and what its benefits and drawbacks are.

What is tenancy in common?

Tenancy in common (TIC) is a form of joint property ownership that allows multiple individuals to own a property together. When a property is held in TIC, each owner holds an individual and undivided interest in the property, which can be of equal or unequal shares.
In a tenancy-in-common situation, each owner has the right to use and occupy the entire property, regardless of the size of their ownership interest. This means that each owner has access to the entire property and can use it for their own purposes, subject to any agreements or restrictions that may be in place.
Unlike other forms of joint ownership, such as joint tenancy or community property, TIC does not include an automatic right of survivorship. This means that when one owner dies, their ownership interest does not automatically pass to the other owners. Instead, it becomes part of their estate and is distributed according to their will or the laws of intestate succession.

How does TIC work?

Within a TIC structure, each owner is responsible for their share of the expenses associated with the property, such as mortgage payments, property taxes, and maintenance costs. If one owner is unable or unwilling to pay their share of the expenses, the other owners can cover the shortfall or take legal action to recover the unpaid amount.
One of the benefits of tenancy in common is that it allows for flexibility in ownership interests. Owners can hold equal or unequal shares in the property, and they can transfer or sell their ownership interest without the consent of the other owners. However, any sale or transfer of ownership interest must be documented in writing and recorded with the local land registry office.
Another important feature of tenancy in common is that it allows for the partition of the property. This means that if the owners cannot agree on how to use or dispose of the property, they can ask a court to divide the property into separate parcels and assign ownership of those parcels to each owner according to their ownership interest. However, this can be a costly and time-consuming process, so it’s generally best to try to resolve disputes through negotiation or mediation.

Pros and cons of tenancy in common

While tenancy in common has several benefits, there are also some drawbacks that property owners should consider before choosing this form of joint ownership.
WEIGH THE RISKS AND BENEFITS
Here is a list of the benefits and drawbacks to consider.
Pros
  • Flexibility
  • Inheritance
  • Protection from creditors
  • Co-ownership
  • Tax benefits
Cons
  • No right of survivorship
  • Potential for disputes
  • Unequal ownership interests
  • Partition
  • Coordination

Pros explained

  1. Flexibility. Tenancy in common is a flexible form of joint ownership that allows owners to hold equal or unequal shares in the property. This means that owners can tailor their ownership interests to meet their needs and preferences.
  2. Inheritance. When a tenancy in common owner dies, their ownership interest becomes part of their estate and is distributed according to their will or the laws of intestate succession. This allows owners to pass their ownership interest to their heirs and ensures that their wishes are respected.
  3. Protection from creditors. In TIC, each owner’s ownership interest is separate and distinct from their personal assets. This means that if one owner has a creditor or legal judgment against them, the other owners’ ownership interests are not at risk.
  4. Co-ownership. TIC allows multiple individuals to own a property together, which can be an attractive option for people who want to invest in real estate but don’t have the resources to purchase a property on their own.
  5. Tax benefits. Tenancy in common can offer tax benefits to owners, as they can deduct their share of the property expenses on their tax returns.

Cons explained

  1. No right of survivorship. Unlike joint tenancy or community property, tenancy in common does not include an automatic right of survivorship. This means that when one owner dies, their ownership interest does not automatically pass to the other owners. Instead, it becomes part of their estate and is distributed according to their will.
  2. Potential for disputes. Tenancy in common can be more prone to disputes and conflicts among owners, as each owner has the right to use and occupy the entire property. Disagreements over maintenance, repairs, or use of the property can lead to tensions and disputes that may be difficult to resolve.
  3. Unequal ownership interests. TIC allows owners to hold unequal shares in the property, which can lead to disagreements over the distribution of expenses and income. If one owner has a larger ownership interest but does not contribute proportionally to the expenses, this can create resentment among the other owners.
  4. Partition. While a partition is an option in TIC, it can be a costly and time-consuming process. If owners cannot agree on how to use or dispose of the property, a partition may be the only option. This can result in the property being sold and the proceeds being divided among the owners.
  5. Coordination. Tenancy in common requires coordination among owners, as they must work together to make decisions about the property. This can be difficult if owners have different schedules, priorities, or preferences.
Overall, tenancy in common can be a good option for property owners who are willing to work together and share decision-making responsibilities. However, it’s important to consider the potential drawbacks and consult with an attorney or financial advisor before choosing this form of joint ownership.

FAQs

What is the difference between common and joint tenancy?

Common tenancy and joint tenancy are two different types of ownership arrangements. In common tenancy, each owner has a separate and distinct ownership interest in the property, and there is no automatic right of survivorship. In contrast, joint tenancy includes an automatic right of survivorship, which means that when one owner dies, their ownership interest automatically passes to the other owners.

What is an example of tenancy in common?

An example of tenancy in common could be two friends purchasing a vacation home together. One friend may own a 60% ownership interest in the property and the other owns a 40% ownership interest. Each owner would have the right to use and occupy the entire property, and their ownership interests would be separate and distinct.

Key Takeaways

  • Tenancy in common is a form of joint ownership that allows multiple individuals to own a property together.
  • Each owner has a separate and distinct ownership interest in the property and can hold equal or unequal shares in it.
  • Tenancy in common does not include an automatic right of survivorship, and each owner can pass their ownership interest to their heirs.
  • Property owners should carefully consider the benefits and drawbacks and consult with an attorney or financial advisor before choosing this form of joint ownership.

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