If you don’t know what tenancy in common (TIC) is, then it may be time to consider it as an option if you are purchasing real estate with one or more partners. In this article, we will explore what tenancy in common means and how it works within the legal framework of real estate ownership. We will also provide some information to help you through the process of purchasing your first property in partnership with others. So, without further ado, let’s get started!
What Is Tenancy In Common?
An arrangement in which two or more people share ownership rights in a property or parcel of land, they each own an equal or different percentage of the total property. It can be either commercial or residential. If one tenant in common dies, they may choose to leave their share of the property to any beneficiary they desire.
The Benefits & Drawbacks Of Holding Property As Tenants In Common
Buying a home with other buyers in an agreement of tenants in common might make it easier for you to purchase a home. Split the necessary deposits and payments, and the cost of maintaining the property with others to keep your costs low. Moreover, borrowing money could differ between people and a tenancy in common allows for better handling of combined money matters.
If mortgaging property as tenants in common, all co-borrowers are legally required to sign the documents. If a member defaults, the lender may foreclose on the property from all members of the group. In addition, even if one or more borrowers stop making contributions to the mortgage payment, the other borrowers have to still make their contributions to avoid the house being foreclosed on.
Naming beneficiaries on the property gives the co-tenant power over his or her share. If a co-tenant dies without a will, his or her interest in the property will go through probate—an expensive event both in terms of time and money.
In the process, the other occupants may now own the property with a person they know or disagree with. This new owner may file a partition suit, in which case, an unwilling occupant would have to either sell their stake or divide the property.
Some of the benefits include:
- You can also buy a property with this arrangement when you otherwise can’t.
- Depending on the people in a group, the number can change.
- Different people can each own shares of the property.
The drawbacks of tenancy in common:
- Every tenant is liable for debts and property tax, regardless of whether or not he is aware of them.
- You only need one of the parties involved to force the sale of the property.
- You do not automatically inherit someone’s property rights when they die.
What Are The Rights Of Tenancy In Common (TIC)?
Tenancy in common (TIC) is a legal arrangement in which two or more parties jointly own a piece of real property, such as a building or parcel of land. The terms of the arrangement differ from one case to the next, depending on each party’s purchase contract and legal agreement. So one thing to know about a TIC is that the owners can choose to sell their share at any time, and also reserve the right to pass their share to their heirs when they die.
Dissolving A Tenancy In Common
If a member wants to dissolve a tenancy in common, one or more co-tenants can buy out other members and go their separate ways. In this scenario, however, when the tenants do not develop compatible plans for the property’s use or improvement, or when they want to sell the property, they must reach a joint agreement with each other to go forward. This action could be voluntary or court-ordered, depending on how the co-tenants communicate with one another.
Known as a partition in kind, this process legally divides property among members. In order to use this option, all tenants must consent to the split. If tenants are not adversarial, this method is often chosen as it is the quickest and most straightforward option.
If the co-tenants cannot agree to co-habit, they may divide the property. In this case, the holding is sold and the proceeds are divided among the co-tenants according to their respective interests in the property.
Final Remarks: Tenancy in Common (TIC)
Owning property together isn’t an arrangement you want to know very little about in case you wind up benefiting from this type of living and financial arrangement. Additionally, if you’re contemplating purchasing a house with another person or couple with the intent to live together as tenants in common, it’s important to know that there are many considerations such as property taxes, home maintenance costs, insurance premiums, and more. There are many pros and cons to owning a property as tenants in common so make sure to do your research before making any final decisions.