Tenancy in common (TIC) is a form of property ownership in which two or more individuals share ownership rights in a property. Unlike other ownership structures, TIC allows each owner to possess an unequal share of the property, with each co-owner having the right to sell, transfer, or mortgage their interest without requiring permission from other co-owners.
This ownership structure offers flexibility for investors and family members who wish to own property jointly while maintaining individual control over their respective shares.
How Tenancy in Common Works
In a TIC arrangement, each co-owner receives a separate deed reflecting their ownership percentage. These ownership interests can be divided in any proportion agreed upon by the parties. For example, one owner might hold a 25% share while another has 75%.
Despite having different ownership percentages, all co-owners have equal rights to use and enjoy the entire property. However, financial responsibilities such as mortgage payments, property taxes, and maintenance costs are typically divided according to ownership percentages.
Tenancy in common has several distinctive characteristics that set it apart from other forms of co-ownership.
There is no right of survivorship, meaning that when a co-owner dies, their interest passes to their chosen heirs rather than the surviving co-owners. Co-owners can own unequal shares of the property and have the freedom to sell or transfer individual interests without consent from other owners.
This ownership structure doesn’t happen automatically when people buy property together. It must be specifically set up.
Tenancy in Common vs. Joint Tenancy
Joint tenancy is characterized by equal ownership shares and the right of survivorship, meaning that when one owner dies, their share automatically transfers to the surviving owners.
This makes joint tenancy popular among married couples who want the property to pass automatically to a surviving spouse.
Feature | Tenancy in Common | Joint Tenancy |
|---|---|---|
Ownership shares | Can be unequal | Must be equal |
Right of survivorship | No | Yes |
Transfer rights | Can be transferred to anyone | Transfers break joint tenancy |
Creation | Must be specifically created | Often created automatically |
Ownership termination | By sale or legal action | By death or transfer |
Advantages of Tenancy in Common
Tenancy in common offers flexibility to own unequal shares based on financial contributions and provides estate planning benefits by allowing property to be passed to chosen heirs. It enables diverse investors to pool funds and allows owners to enter or exit the arrangement independently — facilitating fractional ownership in expensive properties.
This structure is ideal for co-buyers with differing contributions
Investment properties with multiple investors
Situations involving unmarried couples or family members wanting individual control over inherited properties
Real-World Applications
Tenancy in common has become increasingly popular in expensive real estate markets where affordability challenges prevent individual ownership.
In cities like San Francisco, where the median home value is $720,075, TIC arrangements allow multiple buyers to enter the market by purchasing a share of a property rather than an entire unit.
Commercial real estate investors also frequently use tenancy in common structures to pool resources for larger purchases, allowing diversification with smaller individual investments.
Disadvantages of Tenancy in Common
Tenancy in common offers advantages but also presents challenges for co-owners. Conflicts may arise over property use, maintenance, and improvement costs, particularly if financial obligations are not met.
Dividing property use can be complex, and legal action (partition) may be necessary if co-owners can’t agree on selling. Financing can also be difficult to obtain, as lenders may hesitate to finance partial interests.
Tax Implications
Property taxes are a significant consideration in any real estate ownership arrangement. With tenancy in common, property tax responsibilities are typically shared according to ownership percentages. However, the entire property receives a single property tax assessment from the local tax authority.
Understanding how property taxes work under tenancy in common is essential, especially when significant differences exist in ownership percentages. Property tax increases can affect all owners regardless of their percentage of ownership.
At Ownwell, we help property owners navigate property tax appeals to ensure fair assessments, potentially saving co-owners significant amounts on their property taxes.
Creating a Tenancy in Common Agreement
When establishing a tenancy in common arrangement, create a formal agreement addressing key aspects of co-ownership. The agreement should specify ownership percentages and financial responsibilities, establish procedures for resolving disputes between owners, and outline rules for selling individual interests or the entire property.
We recommend including maintenance and property management responsibilities, as well as buyout provisions if one owner wishes to exit the arrangement. A well-drafted agreement can prevent misunderstandings and provide a framework for resolving conflicts that might arise during co-ownership.
Protecting Your Investment
To protect your investment in a tenancy-in-common arrangement, take several precautionary measures. Obtain title insurance to guard against ownership disputes and consider liability insurance to protect against claims arising from property use.
Investigate property tax exemptions that might be available to reduce tax burdens and establish clear written agreements covering all aspects of co-ownership. Consult with legal and tax professionals before entering the arrangement to ensure all potential issues are addressed proactively.
Make Tenancy in Common Work for You
Tenancy in common offers a flexible ownership option for co-owners with varying needs. It provides benefits for estate planning and investment, but requires careful planning and clear agreements to prevent conflicts.
Consult with legal and tax professionals before entering into such an arrangement to ensure it aligns with your financial and estate goals.
As a co-owner in a tenancy-in-common agreement, managing property taxes is a shared responsibility.
At Ownwell, our experts help co-owners protect their investments by ensuring fair assessments. Explore our property tax appeals and exemption services to reduce your shared tax burden today.