Tenants in Common Defined
What Is Tenants in Common?
One way for more than one person to hold property
By Moshe Pollock of Realtor.Com
There are various forms of property ownership. Tenants in common (or tenancy in common) is one of these. While the term “tenants” might imply renting, tenants in common are the owners of the property. There is no maximum number of persons who can be tenants in common, and the tenants do not have to hold equal shares. For example, one tenant in common can own 75 percent of the property and the other tenant can own 25 percent. Such an arrangement frequently reflects the portion of the purchase cost the respective tenants paid.
Features of tenancy in common
Typically the tenants sign a tenancy in common agreement that sets out the percentage of ownership for each party and other relevant matters. This is significant, because each tenant is able to sell his or her shares separately. Also, unlike joint tenancy, tenancy in common does not involve the right of survivorship. This means that in tenancy in common, each tenant’s interest does not pass to the other tenants upon death. Each tenant can bequest his or her interest by will and if there is no will, the interest passes by applicable law.
No matter what the ownership percentage of the tenants, all tenants in common have the right to possess and to have access to the property. Even if just one tenant resides in the property, he cannot exclude other tenants from entering it. The tenants are each responsible for the mortgage, taxes, maintenance and other necessary expenses. But these costs are apportioned based on the percentage of ownership.
Advantages of tenancy in common
Tenancies in common can be created relatively easily through a simple written agreement. Similarly, the tenancy can be terminated readily in one of several manners. The tenancy can be dissolved by the tenants agreeing to sell their shares to one of the tenants. All of the tenants might sell their interests to someone who is not already a tenant. Each tenant is free to sell his or her interest to someone outside the tenancy. That purchaser would then join the tenancy in common. The individual percentage of the tenant’s contribution to the purchase price can be reflected in the ownership interest.
Tenancy in common disadvantages
Because each tenant’s interest can be passed on to the heirs, the remaining tenants may be forced to continue ownership with an undesired party. An heir might want to sell the property when the other tenants do not. A tenant’s sale of his or her interest to an outside party might also result in an unwelcome tenant in common. If the tenants cannot agree upon to whom to sell the property, there could be problems. In all of these situations, the tenants would need to turn to the courts in a partition action. A partition action involves asking the court to sell the property and to divide the proceeds among the tenants. It might result in one of the tenants buying the shares of the other tenants. In some cases, such as vacant land, it might be possible to divide the property, giving each tenant his or her own piece. In any case, partition actions are frequently lengthy, unpleasant and expensive.
Final notes on tenancy in common
Tenancy in common is one way of owning property that protects each purchaser’s interest. Each tenant holds an individual, separate share of the real estate as a whole. But there are legal ramifications of ownership by tenancy in common that might not be desirable in every situation. When considering tenancy in common as the form of ownership, purchasers should consider all the implications and obtain advice from knowledgeable professionals.