Tenancy in Common (TIC) is a legal arrangement in which two or more parties share ownership rights in real estate property or a parcel of land. Each owner can control an equal or varying percentage of the total property, whether it is commercial or residential. The parties involved are known as tenants in common.
TIC is one of three main types of shared ownership. The other two are Joint Tenancy and Tenancy by Entirety. Unlike other arrangements, TIC has no right of survivorship, meaning that when a tenant in common dies, their share passes to their estate and can be bequeathed to a beneficiary.
Key Takeaways
- Equal or Varying Ownership: Tenancy in Common (TIC) allows multiple parties to hold ownership interests in a property.
- Succession Flexibility: Tenants in common can bequeath their share to a named beneficiary upon their death.
- Flexible Participation: New tenants can join an existing TIC arrangement.
- Distinct from Joint Tenancy and Tenancy by Entirety: These are other types of property ownership agreements with different rights and obligations.
How Tenancy in Common (TIC) Works
Owners as tenants in common share interests and privileges in all areas of the property, but each tenant can own a different percentage or proportional financial share of the property.
A TIC agreement can be formed at any time. An individual can join a property as a tenant after others have already entered into a TIC agreement. Each tenant can independently sell or borrow against their ownership share, though no tenant can claim ownership of any specific part of the property.
Dissolving Tenancy in Common
Tenancy in Common can be dissolved in several ways.
- Buy Out: One or more tenants can buy out other members to dissolve the TIC through mutual agreement.
- Partition Action: If an agreement cannot be reached, a voluntary or court-ordered partition action may occur. The property can be physically divided (partition in kind) or sold, with proceeds distributed to tenants according to their ownership shares.
Property Taxes Under Tenancy in Common
Since a TIC agreement does not legally divide a property, most tax jurisdictions will issue a single property tax bill. Additionally, jurisdictions often impose joint-and-several liability, meaning each of the independent owners may be liable for the full property tax amount. Each tenant can deduct the amount they contributed from their income tax filings.
Joint Tenancy and Tenancy by Entirety
Apart from TIC, Joint Tenancy and Tenancy by Entirety are other shared ownership forms.
- Joint Tenancy: Tenants share equal parts of the property acquired at the same time with right of survivorship; the share passes to the surviving owners upon death.
- Tenancy by Entirety: Typically for married couples where both spouses have an equal and undivided interest in the property treated as one entity.
Pros and Cons of Tenancy in Common
Purchasing property with a family member, partner, or friend can provide several benefits, though it also comes with challenges.
Pros
- Facilitates joint property purchases.
- Number of tenants is flexible.
- Various degrees of ownership are possible.
Cons
- No automatic survivorship rights.
- All tenants share liability for debts and taxes.
- One tenant’s choices can affect others, potentially forcing sale or partition.
Example of Tenancy in Common
In California, joint real estate ownership is often structured as Community Property, Partnership, Joint Tenancy, or Tenancy in Common. Unmarried parties generally default to TIC unless expressly stated otherwise. TIC is particularly common in San Francisco and other parts of California, helping many residents enter the real estate market.
Benefits of Tenancy in Common
Tenancy in Common (TIC) allows multiple parties to co-own real property with the ability to individually sell or transfer their share, while also providing opportunities for inherited ownership.
What Happens When One of the Tenants in Common Dies?
The deceased tenant’s ownership share is passed to their estate and handled according to their will. Surviving tenants continue to own and occupy the property.
Common Disputes Among Tenants In Common
Issues may arise when tenants misuse their ownership rights, such as when a minority owner overuses or misuses the property, causing tension. Consequently, all tenants must establish clear, mutually agreed-upon rules for property use and maintenance.
The Bottom Line
Tenancy in Common represents one of three types of property ownership where multiple parties share interests in real estate or land. While each tenant has proportional rights and responsibilities, TIC is flexible and can be adjusted to meet the financial and personal needs of its occupants.
Using a will or designated beneficiary for passing ownership can foster better estate planning compared to other frameworks like Joint Tenancy or Tenancy by Entirety.
Related Terms: Joint Tenancy, Tenancy by Entirety, Community Property, Real Estate, Legal Agreement.
References
- California Legislative Information. “Interests in Property”.
- SirkinLaw. “Tenancy In Common (TIC)—An Introduction”.
- PocketSense. “Risks of Tenants In Common”.
