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What is tenancy in common?

Two people shaking hands in front of a house
AJ_Watt/Getty Images
Two people shaking hands in front of a house
AJ_Watt/Getty Images

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While the name sounds suggestive, tenancy in common doesn’t have anything to do with living together. Rather, it is a legal arrangement, a type of co-ownership in real estate or land. Tenancy in common (TIC)  allows multiple people to simultaneously own shares in the same property and bequeath that ownership stake to an heir. These people, and sometimes the entire arrangement, are known as tenants in common.

In many places tenancy in common is the most common (pun intended) method of jointly owning real estate.  For example, “in California, tenancy in common is the default way to hold property,” Sacramento attorney Elizabeth Carlsen explains. It may even be the default assumption that multiple owners are in a TIC agreement when they purchase a home or other property together, unless their contract specifically states otherwise.

Read on to learn more about the definition of tenancy in common, how it works, and how this practice differs from the other major types of shared property ownership, such as joint tenancy and tenancy in entirety.

What is tenancy in common?

Tenancy in common is one way to have a concurrent estate, which is another way of saying that it’s a way to allow more than one person to own a specific property. The exact way tenancy in common works differs by state, but it usually involves certain key elements.

  • There must be at least two parties involved; there is no maximum limit to the number of people who can own a property together. Of course, there is an inverse relationship between the number of owners and the percentage of ownership available to each party. In short: If you include more people, the slices of the real estate pie get thinner for each person.
  • All the parties don’t necessarily have the same degree of ownership. One party may hold a claim to 25 percent of a property, while the other owns 75 percent.
  • The arrangement doesn’t have to be permanent. “This type of ownership can be dissolved or changed, usually by the agreement of all parties,” Carlsen says.

The terms of a TIC agreement may also vary on a case by case basis. Under some TIC contracts you can sell your share of the property without permission from the other parties involved. Some contracts may include language that says you can’t sell your interest in the property without the approval of the other owners. If it’s the latter, having a large number of owners could become a headache.

Likewise, some TIC agreements allow all parties to access the property at any time while other contacts may have certain restrictions for how and when you can enter and/or use the property. Your rights and responsibilities will come down to how you choose to word the legal contract, so make sure a real estate attorney reviews it before you sign on the dotted line.

One more unique feature of tenancy in common: the disposal of the shares upon the death of one of the parties. “When one tenant dies, their ownership interest does not dissolve,” Carlsen says. “Therefore, if you own 1/4 of a house with three other friends, you can leave your 1/4 interest to someone else upon your death.” However, as Carlsen warns, “Tenancy in common can be a mess when new individuals hold the property. Bringing in a new owner may require changing the original ownership scheme.”

Other types of shared property ownership

Aside from tenancy in common, there are two other primary ways to own a residential or commercial property.

TIC vs joint tenancy

There are three main differences between TIC and joint tenancy.

  1. All parties in a joint tenancy agreement take equal shares: If there are five owners, each party owns 20 percent of the property, for example. A tenancy in common arrangement does not require this, so the percentage of ownership may be lopsided if all parties are okay with it.
  2. All owners in a joint tenancy must take possession of the property deed at the same time. In a TIC, some owners may buy in or take control of a share at a later date.
  3. Joint tenancy shares can’t be bequeathed to another person. Carlsen says, “A joint tenant’s interest cannot be passed to someone other than the other owner(s) upon death. For example, if two sisters own property as joint tenants, and one sister dies, the living sister now owns the entire property. It helps to make title to a property cleaner.”

Joint tenancy arrangements are generally for life. In some situations, one joint tenant can sell their ownership shares to another party. If so, the ownership arrangement often becomes a tenancy in common.

TIC vs tenancy in entirety

Also called tenancy by the entirety, this type of ownership is usually exclusive to married couples. Each party has equal rights to occupy the property and if one person dies the interest automatically transfers to the other owner (also called right of survivorship). You can’t transfer your ownership without consent from the other person.

Pros and cons of tenancy in common

There are potential wins and losses related to TIC agreements. Here are a few things to keep in mind if you’re considering this type of real estate share-ownership.

Pros:

  • Can make property ownership possible if you can’t afford it on your own
  • Possible to leave your share to someone else
  • You share liabilities and property taxes with co-owners

Cons:

  • If another tenant bequeaths their shares, you may be co-owning with someone you don’t know or care for
  • You may not be able to sell your shares without consent of other owners
  • You can’t claim ownership to specific parts of the property, even if you own a majority percentage
Written by
Lara Vukelich
Insurance Contributor
Lara Vukelich is a freelance writer who has written for Bankrate, Huffington Post and Quiet Revolution to Expedia, Travelocity, and MyMove. She is based in San Diego, California.
Edited by
Senior homeownership editor