Tenancy in Common (TIC) is a form of ownership in the real estate investment industry where multiple parties can hold an interest in a single property. Each tenant or owner has an undivided, separate interest in the property, and each owner holds a deed for their respective interest. Here are some key points to understand about Tenancy in Common (TIC):
- Ownership Percentage: Each tenant in common owns a specific percentage of the property. This percentage doesn’t have to be equal; it can vary based on the agreement among the co-owners.
- Independence of Shares: The shares owned by each tenant in common are independent of each other. This means that owners can sell, transfer, or bequeath their share without the consent of the other owners.
- Shared Common Areas: Though each owner has a separate interest, the common areas of the property, like hallways, roofs, and elevators, are jointly owned and used by all tenants.
- Mortgages and Financing: Financing could be separate for each owner, as each owner’s interest can be independently mortgaged. However, each tenant’s personal creditors can claim against that tenant’s share of the property.
- Death of a Tenant: Upon the death of a tenant in common, their interest in the property passes on to their heirs or as per their will. It doesn’t automatically get transferred to the surviving co-owners.
- Right to Occupy: Each tenant in common has the right to occupy and use the entire property, but must respect the equal rights of the other co-owners.
- Decision Making: Decisions regarding the property, like maintenance and leasing, often require the agreement of all or a majority of the co-owners.
- Legal Actions: If disputes arise, a co-owner has the legal right to file a partition action to sell the property and divide the proceeds proportionally based on ownership interests.
Tenancy in Common is a popular investment structure in real estate because it allows investors to pool resources to acquire larger or more expensive properties. It’s essential for co-owners in a TIC agreement to have a comprehensive written agreement that outlines the rights and responsibilities of each owner to prevent and resolve potential disputes.