It is important to fully understand the details surrounding tenancy in common (TIC) when looking to buy property with this type of arrangement. Tenancy in common is the ownership of property by two or more individuals, in equal or unequal shares. There is no limit to the number of people who can own the title of a piece of property, meaning it can be owned by as few as two individuals to well over 100.
Tenancy in common is sometimes confused with joint tenancy, but they are very different from one another. Unlike joint tenancy, tenancy in common does not include right of survivorship, meaning an individual’s ownership cannot be inherited by a person of their choosing rather than automatically passing to another tenant upon death. Joint tenancy can be broken fairly easily, however. If one of the joint tenants sells the interest to another person, the joint tenancy is broken and a tenancy in common is created.
Tenancy in common is becoming increasingly popular as the price of real estate continues to rise and communities adopt stricter growth and conversion restrictions. TIC arrangements lower prices and increase the number of choices for buyers who are able to pool their resources and buy property they may not otherwise afford. By entering an agreement among themselves on the allocation of rights and responsibilities, each buyer ends up with only what he or she needs. Tenancy in common arrangements are also beneficial in that they increase sale prices and marketing options for sellers by allowing them to sell portions of their property to buyers for prices that typically add up to more than what the seller would receive from a single buyer.
The following are some of the issues commonly covered in a tenancy in common agreement:
- Individual and group usage rights and maintenance responsibilities
- Description of the owners’ financial obligations including deposit, mortgages, taxes, common area maintenance and other expenses
- Each owners’ monthly payment
- Management of the property including accounts receivable, accounts payable, maintenance and janitorial
- Rules governing usage of the property by the owners such as pet policy and noise restrictions
- Meeting and decision making procedures
- Policy in the event of death or bankruptcy
- Sale of interests, group approval of prospective purchasers and rights of refusal
- Dispute resolution
Tenancy in common agreements should not be kept simple, but rather cover every issue possible and also include an index or table of contents. If you ever have an issue, you will want to keep the dispute resolution process short and be provided with a clear solution.
Tenancies in common involve greater risk than owning individually, so these risks need to be carefully considered and weighed against the benefits of co-ownership. If you are looking to buy property, AllAcres would be more than happy to help. Our user friendly website allows you to search multiple properties with ease. Call us today at 855-227-3741 or contact us online with any questions.