Tenancy In Common (TIC): How It Works & Pros & Cons

$110,871 is the annual income required by Americans to buy a house in 2024. This means that there has been nearly a 50% increase in the last few years. Such a rise has made ownership of homes in the US difficult for Americans. However, co-ownership in a property has become a feasible option. 

In co-owning, the arrangement is often structured through a tenancy in common agreement. In this agreement, individuals can co-own properties with friends, family members, or business partners. The parties share ownership rights and responsibilities of the property. If you want help getting a mortgage for your venture, reAlpha can help you find vetted lenders near you.

Tenancy in Common (TIC) is a real estate arrangement where two or more individuals share the right of ownership of a property. Tenants in common can sell or transfer the ownership independently amongst the co-owners.

Co-owners have the option to have different percentages or share the total property equally. The property is owned by the group if there are more than 2 people who have tenancy in common, the property is equally owned by the group. So, tenants can share the entire property regardless of the size they control.

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Tenancy in common works on these 4 standards:

The co-owners have to split the costs of running the property. This can be dependent on how much percent a person owns. However, legal agreements can divide the responsibilities.

Any decision about the property has to go through both the parties. May it be any repairs, renovations, or sale of the property. It is important to set clear rules so that you don’t end up in any arguments in the future.

Co-owners can make the sale or transfer of the property without needing to get permission from co-owners. If one person dies, the property can be transferred to their legal heir instead of co-owners. 

When you get into a co-ownership agreement, you need to have everything signed with a lawyer. The percentage and all details should be clearly mentioned. Furthermore, all co-owners have equal rights to use the property, irrespective of their ownership percentage.

Tenancy in common is a popular option, but there are several other options available in the market.

• Tenancy in Severalty- The property is owned by a single entity or individual. The entire idea is that the owner is served by other owners.
• Joint Tenancy- In this agreement, everybody has an equal share of the property. The property passes to the other tenants in case one partner passes away.
• Tenancy by Entirety- The arrangement is available for married couples across a few states in the US. If all the parties agree to the sale, then only it can be sold.

Tenancy in common has its advantages and disadvantages. Let us look into them below.

• Reduces cost burden- If you are looking to buy a high-value property, it reduces your cost burden. Further, the taxes and home warranty costs are also divided amongst the tenants.

• No need for equal investment- Tenancy in common allows you to hold different ownership percentages. This lets you make an investment which fits well for you.

• Equal rights to use property- All the co-tenants have the option to equally use the property, even if they own a lower percentage.

• No right of survivorship- There is no right of survivorship, so you can co-own a property with a stranger if somebody inherits the tenant's share.

• Has joint liability- All the co-tenants are liable to pay the tax and debts. So, if one party is not able to pay their share, everybody else is held liable.

Yes, with the high median home sale price, tenancy in common is a great option to own a house. The partnership offers great flexibility, from payment to passing the share to beneficiaries. However, it has some pitfalls, like joint liability and no right of survivorship.

If you want to explore tenancy in common, it is important to understand your situation and weigh all options.

The disadvantages of tenants in common is that there is right of survivorship deed if one party dies. So, you can be stuck with somebody you are not comfortable with. Furthermore, everybody is liable if somebody is not able to make tax or debt payments.

Joint tenancy and tenancy in common are nearly the same. The only difference is that in tenancy in common, partners can have equal or unequal share. However, in joint tenancy, each tenant holds an equal share.

Tenants in common is an arrangement where two or more parties co-own a property. They have the option to either share the same percentage or it may vary.

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