Tenancy In Common: Understanding TIC And How It Works

When it comes to property ownership, there are several ways that people can hold titles. Tenancy in common (TIC) is one of these types of ownership.

Tenancy in common is a form of shared ownership where two or more people share equal rights to the property. Unlike joint tenancy, which means equally sharing everything from mortgage payments to maintenance costs for an asset, tenants in common refers to shares that are owned independently.

This type of ownership could result in one person having exclusive responsibility for upkeep on a house while another pays taxes on the land only when they use it rather than paying rent. A tenant with interest in real estate has limited control over how other co-tenants use their share of the property.

Therefore, tenants cannot legally force other tenancy in common owners to participate in decisions about the property as a whole. While tenancy in common is a form of shared ownership, it's important for people using this type of co-ownership to have a written tenancy agreement so that everyone understands the expectations.

In this article, we will explore the rights and responsibilities associated with TICs, how they work, why you may want to use them, the pros and cons associated with this type of ownership, and how to dissolve tenancy in common.

What is Tenancy in Common?

Tenancy in common is essentially a partnership of ownership, allowing two or more people to own property together. A tenancy in common can be created where there are no co-owners to the property, like at inception when distributing an inheritance.

Such tenancies tend to occur with multiple siblings who inherit part of a single parent's property or with business partners who purchase and then continue to hold jointly-owned property. Tenancy in common is also frequently used for co-owned properties by married couples and unmarried partners alike.

This form of ownership is often selected due to the ease by which it can be amended later on, if and when interests change. This amendment can be in the form of either a will or a deed between owners that alters the tenancy via a common agreement.

Joint Tenancy vs. Tenancy in Common

Joint tenancy and tenancy in common are two different types of shared ownership. Even so, they are often confused as being the same thing. However, joint tenants own property together without the right of survivorship, unless stated in writing, whereas tenants in common can own the property individually. Therefore, anyone involved in either type of real estate ownership should be aware of the differences so that they can avoid any possible confusion when buying or selling their assets.

According to state law, multiple owners are placed into two major categories: joint tenants by the entirety, or joint tenants, and tenants in common. The key element that differentiates tenant in common ownership from joint tenancy is that, in the latter, all shares are equal, and no owner is presumed to own a greater portion of the property than the other owners.

For instance, if two people buy a house together and one person puts more into the house financially or receives payment for taking over some debts of purchasing the housing, they automatically become tenants in common, not joint tenants.

Additionally, individuals who have different shares on a property will be considered tenants in common. This remains true even though the title may state otherwise.

The Different Types of Tenancy in Common

Tenancy in common is one of several forms of co-ownership. A tenancy in a common relationship can exist only when it is created by a deed between the specific parties involved. Here are some of the different types of tenancy in common.

The Basic Tenancy in Common Agreement

This type of tenancy in common is the most common form. It’s where two or more people own property and share profits from sales.

The Shared Tenancy in Common

As the second most common form of tenancy in common, this type of co-ownership is one in which two or more people own property and share profits from any sale. However, this is only possible if they sell the property together.

Tenants in Common With a Mortgage

TIC with a mortgage is where a lender becomes a co-owner of the property. When the property is sold, the lender will be paid off before any other owner receives a share of the sale price.

How Tenancy in Common Works

Tenancy in common allows ownership of a property to be divided into separate shares. Tenants own an undivided interest in the whole property rather than titles for a specific portion of the title.

It can help with estate planning for families that own real estate. For instance, a tenant may choose to give away or sell their share of the property to a family member without disturbing the shares owned by the other tenants.

Compared to a joint ownership system, a landlord has more flexibility over who the property is leased to and which rules apply to the property. This flexibility is possible because each tenant is only responsible for their interest and not the interest of the other tenants.

Landlords are also free from liability since they do not act as trustees over their tenants' interests, except to the extent of their interest. However, this means that a landlord has less control over the property's day-to-day management and upkeep. As such, each tenant is responsible for paying for their share of repairs and other maintenance tasks.

A tenancy in common can be created by express agreement between the owners. It can also arise when co-owners do not intend to share ownership, but rather, they’d prefer to act as tenants in common, which is a type of unwitting tenancy in common.

Pros And Cons Of Tenancy In Common

It is important to know the differences between the different types of ownership, especially in terms of real estate investments and property management. Each co-ownership type comes with different pros and cons, too. Let’s discuss the pros and cons of tenancy in common.

Pros of TIC

  • Tenants in common are essentially free to do as they please. Tenants in common tend to attract individuals who like the idea of not needing approval from other owners when making decisions involving the property.
  • Also, since there is more than one owner in a TIC situation, if one owner dies, the deceased's interest will go directly to the heirs without any problems with the probate. The main draw for tenants in common concerning real estate investing involves the potential for a greater say in how profits are being made and distributed among co-owners.
  • Each tenant has control over their respective share, which means that each tenant can decide whether or not they want their share of profits put back into the property. They can also choose to receive a cash payout instead.

Cons of TIC

  • Tenants in common are able to do as they please, more so than any other co-ownership type. But that does come with its own set of problems, too. For example, suppose one tenant decides to sell the property for whatever reason, and there is no contract stating how much of the profit goes back into the property versus how much can be taken out in the form of a cash payout.
  • In that case, it will be up to both the seller and the buyer to work it all out together. This could result in lengthy discussions, which can ultimately be avoided if the buyer and the seller choose to have an agreement beforehand. Also, since a sale occurs between buyers and sellers, a court will have to decide on the ultimate outcome if both parties cannot reach an agreement on their own.

How To Dissolve Tenancy in Common

To dissolve a tenancy in common, you need to work with a real estate lawyer. However, there are also a couple of things that you can do by yourself to avoid paying unnecessary fees from the lawyer or doing anything illegal.

  1. Find out whether other owners would agree to sell their ownership interest. If they are interested in that idea, go ahead and proceed by finding a buyer for your portion of the interest.
  2. Follow the proper steps required for dissolution of a tenancy in common, but make sure that you don't sell your interest if the other owners are not willing to do so. If that’s the case, your interest will be automatically transferred to a law firm that helps people convert tenancy in common into joint tenants, which is a more expensive alternative to simply selling your interest.

The formal procedure for the dissolution of tenancy in common is similar to the one required for creating it in the first place. From there, you can begin the search for a buyer and close a deal with them with the help of lawyers if necessary.

The difference between the creation of a TIC and the dissolution of the tenancy is that dissolving a tenancy in common entails dealing with someone who wants to buy all of the ownership interest instead of someone who wants to share ownership. Thus, if multiple owners and partial interests are involved, conversion may be easier and cheaper than forcing people to sell their shares before dissolving tenancy in common.

It will take longer to find out what type of property interests you and how much each property type is worth when you go to sell it. If you're the sole owner of property, the dissolution process could be as simple as this:

  1. Notify other owners in writing that they have to sign an agreement about selling their ownership interests or accept your offer of doing so immediately.
  2. Then, wait about thirty to sixty days to ensure that none of the other owners questioned the deal. You can shorten the waiting period but you’ll have to pay an additional fee. After waiting, notify them again if all is well and give them between ten to fourteen days to close the deal. Sell your tenancy in common interest. If there was no deal, you'll need to change the title of your property either manually or with the help of lawyers.

If there are multiple owners, dissolution is a bit more complicated. You’ll need to follow these steps:

  1. Dissolve all tenancy in common ownership interests simultaneously or within one year after you first notified everyone about possibly selling their interests.
  2. After that, sell your interest if the others in the TIC did so, too.
  3. Apply for a court order to request that the other owners sell their ownership interests if your state requires you to do so. The process will take longer if this is the case, but it might ultimately be less expensive than a regular sale as long as you don't have to pay extra for dealing with new owners, such as having to negotiate the price.

Note: If a tenancy in common property has been foreclosed, the new owner may find that the previous owners created it by signing an agreement.

Final Thoughts

Tenancy in common is a form of co-ownership that can benefit people who want to share property but don't want the legal responsibility or liability of owning property. TIC owners each own an interest in the whole property and they have full access to all parts of the property without any restrictions.

This type of ownership also comes with certain benefits and drawbacks, which you should consider before deciding whether this is the right fit for your situation. You may find that other types of shared ownership are better suited to your needs if you're not interested in sharing rights over the entire space via a joint tenancy or if there's more than one person involved, meaning there are co-tenants.

We hope this article has helped clarify some important aspects about what tenancies in common are and how you can use them.


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This page last updated: March 29, 2022