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Understanding tenancy in commonAlthough “tenant” is a term typically ascribed to renters, tenancy in common (TIC) is all about the ownership of a commercial or residential property. Any number of individuals can be shared owners in a TIC — as few as two people, dozens ... even a hundred or more! Owners can be related or unrelated, but either way, buying as a group empowers co-owners to pool their capital and afford bigger investments. While individual investments may be different, owners share the property equally. No one person or company is in charge. This means that while one owner might have a 50% interest share in the property, they have all the same usage rights as a tenant with 10% ownership. Owning more interest in the home doesn’t necessarily mean you’re entitled to more time, income, or benefits of the property. Some TIC agreements vary, but most are self-managed in this way with undivided property ownership, and their deeds show only their ownership percentages.Selling and inheritance are somewhat unique. Tenants in common do not have survivorship rights, so in the event that a tenant dies, their shares would pass to an heir instead of the remaining co-owners. Example: The Jones, Richmond and Stevens families share a mountain cabin. The Jones family holds 1/2 of the property value, while the Richmond and Stevens families each hold 1/4 ownership. They visit the cabin throughout the years with equal usage rights, and each family plans to pass down their ownership rights to their kids. From there, the heirs can decide to sell the property and distribute the proceeds in line with their ownership interests or keep their shares.
TakeawaysIn short, a tenancy in common:
- Describes fractional ownership where two or more people hold a title to a property
- Allows for different ownership interests — shares can be equal or unequal percentages
- Passes to an owner’s heir, should a tenant die
- Is undivided and self-managed by the owner group