Tenancy in Common

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Tenancy in Common Meaning

Tenancy in common (TIC) refers to a property ownership type where more than one people possess the ownership right in a property. In this type, there is no provision for the right of survivorship; if an owner dies, their right in the property is passed to their estate or legal heir instead of passing to the other owners.

It is legally acceptable to co-own properties and enjoy the undivided interest in the properties. This type of ownership occurrence is known as "Co-tenancy" or "Co-ownership." Examples include joint tenancy, tenancy in partnership, and community property. Furthermore, rules and regulations regarding it may vary with state.

Tenancy in Common Meaning

"Tenancy in common" definition portrays it as the property ownership type enabling more than one person to own a property without the right of survivorship. It is an example of concurrent ownership or co-tenancy.
The advantages are the arrangement's affordability and offer flexibility in updating owners.
The disadvantages are that any owner can sell their shares without obtaining consent from other owners, and determining owners' tax liability is a complex process.
Joint tenancy is different from it. In joint tenancy, every property owner has equal shares, and the right of survivorship exists.

Tenancy in Common Explained

Tenancy in common is an ownership arrangement with more than one owner with different or equal shares in the property. The tenants or owners have the whole property and cannot claim a particular portion of it based on the size of their share. The deed mandates equal rights and privileges to every owner. Furthermore, the tenants included may change due to a sale associated with the property or the death of any tenants.

It's a type of concurrent ownership. When there are many owners listed on a deed, it is considered that they are tenants in common, given there is no other ownership type specified in the deed. In states like Florida and California, tenancy in common is the default form of concurrent ownership. Generally, states also set the maximum number of members that a TIC arrangement can have. The TIC is not liable to pay taxes, but the co-tenants or the TIC members are responsible for paying taxes. The tax return filing process is complex when there are multiple owners, and each owner has a different stake in the property.

Examples

Example 1

Two brothers, Adam and Edward, share the ownership of their ancestral home in a TIC arrangement; both own 50% of the property. However, none of the brothers can claim a certain part of the property as their own. As per the TIC agreement, the whole property is equally available to them, and no one can divide it unless it is done through mutual consent and confidence. In a tragic car accident, Adam, the elder brother, dies; now, his share of ownership of the ancestral home will not be given to Edward but will be passed to the legal heir.

Example 2

Jennifer and Jill are friends and bought a property together in 2015 under the TIC arrangement. Based on their investment, Jennifer's share in the property is 60%, and Jill has a 40% share. After a few years, Jennifer plans to buy another commercial property, and to finance its purchase, Jennifer wishes to sell her share in the property to an investor. Jennifer can proceed with selling her property ownership, and Jill can maintain his right to the property or sell the same at his discretion.

Advantages & Disadvantages

Let's look into some of the important advantages and disadvantages of the TIC arrangement:

Advantages

It is not necessary to invest for an equal share of the property; each owner can have a different percentage of share in the property and utilize it.
The number of owners may decrease or increase with time as the tenancy in common is flexible to the number of owners in the property.

Disadvantages

An owner can sell their share without consulting with other owners.
There is no right of survivorship in a tenancy in common arrangement; hence the ownership interest of the deceased owner will not pass to the other owners of the property.
The owners may have different property shares but are equally liable for associated debts and property tax.
Splitting the liabilities like tax bills are a complex process since the property is treated as a single entity for taxation purpose.

Tenancy in Common vs. Joint Tenancy

Tenancy in common and joint tenancy are ways multiple owners hold real property titles together to form joint owners. Let's look into what's the difference between them:

Tenancy in Common	Joint Tenancy
Owners can have equal or different percentages of ownership	Equal shares of the property
Not necessary that all owners enter simultaneously	Owners have entitled to the title or ownership simultaneously
Owners can sell their interests individually	Owners cannot sell their interest; if sold, the joint tenancy is converted to a tenancy in common
No right to survivorship: Property is passed to legal heirs	The right to survivorship exists: The interest of the deceased owner is passed to the remaining owners

Frequently Asked Questions (FAQs)

What is tenancy in common?

It's a type of property ownership. It is significant and common when more than one people own a property. It allows people to co-own property without the provision of the right of survivorship. So, if an owner dies, their stake in the property is passed to their legal heir rather than passing it to the remaining owners.

What Is the difference between a TIC and joint tenancy?

Both are examples of property ownership types common in the United States of America. The major difference is that the joint tenancy arrangement allows the right of survivorship, unlike TIC. In addition, in joint tenancy, all tenants have an equal share in the property, whereas, in TIC, tenants can have equal or unequal shares in the property.

What happens when one of the tenants in common dies?

Suppose a tenant in common dies, and their owned fraction of the property will pass to their legal heir instead of allocating it to the co-owners. Therefore, unlike joint tenancy, there is no right of survivorship in the TIC arrangement.