Buying or converting your home to a tenancy in common, or TIC, may be complicated. Learn about the benefits and drawbacks here.
What you will discover:
What exactly does it mean to be a tenant in common?
What effect does holding property as a TIC have on my capacity to sell it?
When should I schedule a TIC with my spouse?
Can I evict someone with whom I share a house as a TIC?
What are the advantages and disadvantages of owning property as a TIC?
Make a written agreement with your renter.
When you own a house or property, you may not consider yourself a renter. However, historically, a renter was just someone who occupied real estate. A tenant in common (TIC) is a legal term that outlines how two or more persons may share ownership of real estate. Here’s what you should know if you want to buy a TIC or another property with a friend, family, or partner.
Table of Contents
What exactly does it mean to be a tenant in common?
A tenancy in common occurs when two or more persons share ownership of a property on a percentage basis. Property taxes and upkeep are the responsibility of each owner.
A TIC has legal rights to the property based on their ownership share. When a TIC owner dies, their part of ownership is transferred to their estate and divided to heirs. A TIC may also sell or mortgage their stake in the property without the agreement or involvement of the other owner.
Tenants in common often possess the following properties:
Condos, flats, townhouses, and duplexes are all options.
Commercial real estate.
Friends’ or colleagues’ recreational properties.
Land for agriculture.
Due to differences in estate planning and the scope of legal ownership, tenancy under common ownership differs from other forms of ownership. It is useful to understand alternative types of ownership.
Tenant in common
Tenants in common have less rights to the property than joint tenants. Rather than being limited to a portion of ownership, each property owner has the same legal rights and duties as all other owners.
When a property owner passes away, their stake in the property is not included in their estate. Instead, the other owner or owners will retain ownership of the property as they did previous to the death of the other owner. This estate planning instrument is known as a “right of survivorship.”
Tenancy by the whole
Tenancy in common is analogous to joint tenancy. The distinction is that this categorization is only available to couples who are married at the time they purchase the home. The survivorship requirements for tenancy by the entirety are substantially the same as those for joint tenancy. If one spouse dies, the remaining spouse inherits the whole estate.
In this scenario, if the couple owns the property rather than two separate persons, the pair is considered a distinct legal entity. In terms of real estate, each partner has the same rights and duties.
Neither spouse has the ability to sell or split their stake without the approval of the other spouse. One party cannot sell their individual stake in a tenancy in common.
What effect does holding property as a TIC have on my capacity to sell it?
When one owns property as a TIC, it is quite straightforward to sell. A TIC may sell their part of the property without the approval of the other owners. This is known as the “right of partition,” and it allows you to sell, mortgage, or even transfer your share to another person or corporation.
If you acquire the agreement in writing, you may construct a Tenants in Common Agreement to put limits on sale or transfer. Nonetheless, a single tenant in common cannot sell the whole property without the other owner’s permission. In general, one owner cannot compel another owner to sell their share if they do not want to.
When should I schedule a TIC with my spouse?
Even though a joint tenancy or tenancy in full would be preferred, married couples may hold property as tenants in common. Nonetheless, for a number of reasons, couples may choose to hold property as TICs. Listed below are a few examples:
One spouse wishes to pass on their enthusiasm to a kid from a previous relationship.
One spouse wishes to restrict creditors’ ability to take the full value of a property.
The couple want for one spouse to mortgage the property for business reasons while protecting the other half of the property in the event that the company fails.
Essentially, a couple may choose a TIC arrangement to satisfy specific estate planning objectives, manage risk concerns, or restrict exposure due to current debt commitments.
Can I evict someone with whom I share a house as a TIC?
A TIC cannot, in general, expel another TIC. Each tenant has equal property rights and duties. There may be certain exceptions, such as domestic or physical violence.
If you have a disagreement with someone who shares ownership of your house, you should consult with a lawyer about your alternatives.
What are the advantages and disadvantages of owning property as a TIC?
As with any other kind of ownership, there are advantages and disadvantages to owning a property with someone else as a TIC.
Advantages
Because there is no right of survivorship, the property transfers to your heirs rather than the other owners.
Interests are simple to sell or transfer.
Property shares do not have to be equal.
The property’s upkeep and maintenance are shared by all stakeholders.
Regardless of ownership proportion, all parties have an equal right to use and enjoy the property.
It may be less difficult than other options.
The number of owners is subject to fluctuate throughout time.
Disadvantages
Maintenance and upkeep must be agreed upon by all parties.
Another owner may sell or mortgage their stake in the property without your knowledge or approval.
Although everyone is responsible for upkeep and repair, owners must rectify any deficiencies if another owner is not paying their fair amount.
Each party has the right to use and enjoy the property, even if they do not contribute anything to its upkeep.
Taxes and obligations related with the property are the responsibility of all parties, and they must be paid in full even if everyone does not pay in proportion to their ownership stake.
After someone dies, you may need to purchase someone else’s interest from their estate.
Of fact, what is advantageous to one person may be detrimental to another. For example, being able to mortgage your half of the property might be really beneficial. However, if the other owner places a mortgage on the home, it is often a disadvantage. Even though the other owner can only mortgage their portion of the property, you may still have to deal with removing the mortgage when all of the owners desire to sell the property as a whole.
Make a written agreement with your renter.
Common Agreement Tenants must be in writing. To identify ownership interests, an oral agreement will not suffice. The deed or transfer paperwork will usually specify how the owners hold the property, such as tenants in common, joint tenants, or tenancy by the whole. A Tenants in Common Agreement may assist to ensure that everyone is on the same page and holds each other accountable for the shared expenditures.
