What Is Tenancy in Common?

Tenancy in common (TIC) is an agreement where two or more people share ownership rights to a property.  The owners in a tenancy in common agreement can be business partners, friends, couples, neighbors, spouses, etc.. The owners do not have to be related.  

What is interesting about a tenancy in common agreement is that each party can own equal or different percentage of the property, and although one person may own 80% and the other 20%, everyone has equal rights.  

Another unique fact with Tenancy in Common is that the owners of TIC properties can sell their shares at any time and for any reason (company splitting, divorce, etc) to anyone they want.  This can be both beneficial and stressful to everyone involved.

For example, pretend there are three families, the Smiths, Joneses, and Martins who all share a cabin at the lake. The Martin family owns 1/2 of the property while the Smith and Jones families each hold 1/4 ownership. Each family visits the cabin for years with equal usage rights, and each family passes down their ownership rights to their kids when they die. The kids can then decide to either keep or sell their shares.  If the kids decide to sell their shares to someone that causes problems, the Smith and Jones families will now have a headache and need to buy them out or sell their shares too.

Another example could be a couple who bought investment properties together.  If the couple divorces, and one person does not want to be tied to property with their ex-spouse, the first person can sell their share to anyone they want which includes the other spouses biggest enemy. That’s not such a fun surprise for the other person.

A last example is where two friends bought a house together for “friends trips”.  One of the friends gets into financial trouble and takes on massive debt.  They still owe property taxes, etc… Now you can be stuck paying extra so it does not impact your own situation.  If this happens the two of you may decide to sell the house, and if your friend is in big trouble you’ll need to sell your house fast.  If you choose the wrong “we buy houses” company you may not get a good offer.  If you choose to sell with a real estate agent, the house may not sell quickly enough and now you’re stuck in a worse situation and paying agent commissions.

But don’t panic, tenancy in common agreements have benefits including:

• Making buying a property more affordable
• No rights of survivorship
• Being able to own land with less interest in the property
• Interest can be passed to your children with less hassle
• Tenancy in common is easy to amend
• You’re not locked into a partnership if your relationship with the other owners goes south

If this sounds like something you’d like to pursue, forming a tenancy in common is easy and can be done in three easy steps.

1. Decide how much ownership each owner wants on the property.
2. Hire a real estate lawyer to draft the agreement
3. Have the title transferred to the parties and new ownership of the deed recorded

And if you no longer want to keep your tenancy in common agreement, you can always dissolve one.  There are three common ways to dissolve tenancies in common.

• Buy out the departing owner’s share 
• Sell the property in its entirely and divide up the proceeds
• Files a partition action in court asking a judge to order the sale of the home

One important thing to note is that tenancy in common is not the same as joint tenancy as joint tenancy involves a right of survivorship.  That simply means that when you die your shares are given to the other owners rather than passed down to your children or spouse.  This is why joint tenancy is better for business deals than tenancy in common property agreements.

Tenancy in Common vs Joint Tenancy

Tenancy in common agreements are not right for everyone.  They can be easy ways to buy a place in a town you’ve dreamed of like a beach house, and they can also turn that dream into a nightmare if one of the other owners passes away or sells.