Tenants in common is a legal concept that refers to ownership of a particular piece of property among multiple parties. Property owned under the tenants-in-common (TIC) arrangement is typically divided into fractional interests. This means that parties may own varying proportions of the property, and may freely transfer those interests without the consent of the other owners.
For example, Bob and Mary own a rental property together and Bob owns a 60% interest, while Mary holds a 40% interest. They are considered tenants-in-common in this arrangement, even though their ownership interests are unequal. This also means that Bob can freely transfer his interest in the property to another party such as a family member or friend without Mary’s consent.
TIC arrangements also involve the right of survivorship, meaning that when one tenant passes away, the surviving tenant will ultimately own the entirety of the property. This is an important distinction from ownership that is held as joint tenancy, which is when multiple parties hold a property together and, in the event of the death of an owner, that party’s share is(distributed among the other owners.
Tenants in common agreements are common among business partners who need to divide ownership of a property, but also have different levels of financial capabilities and equity. For instance, a small business often might need to purchase a warehouse or an office building to use for their operations, yet not all of the owners are in a financial position to purchase the full building. TIC allows each of the owners to own a fraction of the property and manage their own respective interests.
It is important to understand that tenants-in-common agreements allows parties to hold their stakes in the property independently of one another and transfer them without the consent of other owners. As such, it is essential that, before entering into such an agreement, parties discuss details such as how to manage the ownership stake in the event of an owner’s death or if an owner wishes to transfer their interest to another party.