Tenancy in Common (TIC)

What is Tenancy in Common (TIC)?

Tenancy in Common (TIC) is a form of ownership in real estate where two or more individuals (known as ’tenants’) each possess an undivided interest in the entire property. Unlike other forms of co-ownership, TIC does not convey a right of survivorship. This means that upon the death of one of the owners, the decedent’s share is inherited by the heirs designated in their will, rather than passing automatically to the surviving co-owners.

Key Characteristics:

Undivided Interest: Tenants in common each own a fraction of the entire property but have equal rights to use the whole property.
No Right of Survivorship: Death of a co-owner leads to their interest being passed to their heirs, not the surviving co-owners.
Independent Conveyance: Each tenant can sell, transfer, or mortgage their share independently of the others.
Identifiable Shares: Ownership percentages can differ, and each tenant’s share is identifiable and inheritable.

Examples

Investment Syndicate: Several investors form a TIC arrangement to pool resources and purchase a commercial property. Each investor has an identifiable percentage of ownership and can decide independently to sell their share.
Family Ownership: Siblings inherit a family home as tenants in common. They each own a specific percentage of the property, and if one sibling dies, their share passes to their heirs rather than the surviving siblings.

Frequently Asked Questions (FAQs)

A tenant in common can sell their share independently, but potential buyers are purchasing only that tenant’s interest, not the entire property.

Can tenancy in common co-owners force a sale of the property?

If co-owners cannot agree on the sale or division of the property, any tenant in common can file for a partition, which may result in the court-ordered sale of the property and division of proceeds.

How can ownership percentage be determined in a TIC?

Ownership percentages in a TIC are mutually agreed upon and can be explicitly stated in the deed. It does not have to be equal among all tenants.

Yes, tenants in common can bequeath their interest to heirs or anyone specified in their will.

Joint Tenancy: A form of co-ownership where tenants share equal interest in the property with the right of survivorship.
Right of Survivorship: Legal right whereby a surviving co-owner automatically inherits a deceased co-owner’s share.
Partition: Legal action to divide or sell jointly owned property.
Syndication: Group of individuals or entities that pool resources to invest in real estate or other ventures.
Undivided Interest: Ownership right entitling co-owners to use the entire property even though each only owns a fraction of it.
TIC Agreement: Document that outlines the rights, duties, and responsibilities of tenants in common.

Online Resources

References

“Real Estate Principles: A Value Approach” by David C. Ling and Wayne R. Archer.
“Essentials of Real Estate Investment” by David Sirota.
“State and Local Government Finance” by Ronald C. Fisher.
IRS Publication 527 on Residential Rental Property for information on tax implications.

Suggested Books for Further Studies

“Real Estate Investing: Market Analysis, Valuation Techniques, and Risk Management” by David M. Geltner and Norman G. Miller: This book covers comprehensive techniques and methods in analyzing real estate investments including tenancy in common properties.
“The Legal Environment of Business: Text and Cases” by Frank B. Cross and Roger LeRoy Miller: Explores various aspects of business law including TIC and its implications in real estate.
“Property: Principles and Policies” by Thomas W. Merrill and Henry E. Smith: A deep-dive into the principles behind property law, with sections exploring shared ownership models like TIC.
“Principles of Real Estate Practice” by Stephen Mettling and David Cusic: This book lays foundational knowledge of real estate practice, including a detailed discussion on the tenancy in common.

Real Estate Basics: Tenancy in Common (TIC) Fundamentals Quiz

### Which of the following best describes Tenancy in Common (TIC)? - [x] A form of property co-ownership with undivided interest and no right of survivorship. - [ ] A form of ownership reserved for married couples. - [ ] A lease agreement between multiple tenants. - [ ] Ownership where each co-owner has exclusive rights to part of the property. > **Explanation:** Tenancy in Common involves multiple co-owners having undivided interest in the entire property without right of survivorship. ### What happens to a tenant in common’s ownership share upon their death? - [x] It is inherited by the decedent’s heirs as designated in their will. - [ ] It automatically passes to the surviving co-owners. - [ ] It reverts to the state. - [ ] It must be sold and proceeds divided among surviving owners. > **Explanation:** Upon a tenant's death, their share is inherited by the designated heirs in their will, not passing automatically to surviving co-owners. ### Can a tenant in common sell their share independently of other co-owners? - [x] Yes, each tenant has the right to convey their share independently. - [ ] No, all co-owners must agree and sign for a share to be sold. - [ ] Only if owning a majority interest. - [ ] Only with court permission. > **Explanation:** Tenants in common can independently sell or transfer their interest without needing the consent of other co-owners. ### What is a primary difference between Joint Tenancy and Tenancy in Common? - [x] Right of Survivorship in Joint Tenancy. - [ ] Joint Tenancy allows more than two owners. - [ ] Tenancy in Common requires ownership to be equal. - [ ] Property type differences. > **Explanation:** Joint Tenancy includes Right of Survivorship where interest automatically passes to surviving co-owners, unlike TIC. ### What legal action can a tenant in common take if co-owners disagree on property use or sale? - [ ] Seek arbitration. - [ ] Reduce own use of property. - [x] File for partition. - [ ] Transfer share to another tenant in secret. > **Explanation:** If disagreements arise, a tenant in common can file for a partition, possibly leading to the property’s division or sale and distribution of proceeds. ### What concept allows each TIC tenant equal use of the entire property, despite owning a fraction of it? - [ ] Partition - [ ] Exclusive use provision - [ ] Joint Ownership - [x] Undivided Interest > **Explanation:** Each tenant in common has an undivided interest, granting equal rights to use the whole property regardless of their ownership share. ### In a TIC arrangement, the ownership percentages can be: - [x] Different for each tenant. - [ ] Set at 50% for equal co-ownerships only. - [ ] Only equal to avoid disputes. - [ ] Decided by the property’s total square footage. > **Explanation:** TIC allows for differing ownership percentages, which can be specified in the ownership deed. ### What is one advantage of Tenancy in Common? - [ ] Exclusive control over property sections. - [x] Flexibility in ownership transfer. - [ ] Automatic increase in share due to survivorship. - [ ] Simplified tax reporting for co-owners. > **Explanation:** TIC offers flexibility, permitting tenants to independently transfer, sell, or mortgage their ownership shares. ### How does Tenancy in Common compare to Sole Ownership in terms of property rights? - [ ] TIC tenants have complete sole ownership control. - [x] TIC tenants share undivided interests unlike exclusive ownership in sole ownership. - [ ] Identical, except for survivor rights. - [ ] Short-term compared to permanent sole ownership. > **Explanation:** TIC involves shared undivided interests in the property, whereas sole ownership denotes exclusive control over property rights. ### Can a TIC arrangement exist without specifying ownership percentages in the deed? - [ ] No, the deed must always specify exact percentages. - [x] Yes, but it may default to equal shares among tenants. - [ ] Only if for residential properties. - [ ] Ownership reverts to state rules for unspecified tenure. > **Explanation:** If not specified, TIC arrangements may default to assuming equal shares among the co-owners as per state laws.