What is 'Tenancy In Common'
Tenancy in common allows two or more people ownership interests in a property. Each owner has the right to leave his share of the property to any beneficiary upon the owner's death. Tenancy in common is different than joint tenancy because the transfer of the property to a beneficiary in the event of an owner's death is different: in a joint tenancy agreement, the title of the property is passed to the surviving owner, while in a tenancy-in-common agreement, the title can be passed to a beneficiary of the owner's choosing.
BREAKING DOWN 'Tenancy In Common'When two or more people own property as tenants in common, all areas of the property are owned equally by the group. For this reason, an individual may not claim ownership to a specific part of the property.
Whereas tenants in common may not claim ownership to an individual part of a property, they may have different ownership interests. For example, Sarah and Debbie may each own 25% of a property, while Leticia owns 50%. Because tenants in common may be created at various times, an individual may obtain an interest in a property years after the others entered into a tenancy in common ownership.
In contrast, joint tenants obtain equal shares of a property with the same deed at the same time. As with contract terms for tenants in common, terms for joint tenants are detailed in the deed, title or other legally binding property ownership documents. Some states have joint tenancy as the default ownership for married couples, whereas others have tenancy in common.
Rights of Survivorship
When an owner dies, what happens to ownership of the property depends on the type of ownership defined by the contract. Tenants in common have no rights of survivorship. Unless the deceased person’s will specifies his interest in the property is to be divided among surviving owners, a deceased tenant in common’s interest belongs to his estate. Conversely, with joint tenants, the deceased owner’s interest is automatically transferred to the surviving owners. For example, when four joint tenants own a home and one tenant dies, each of the three survivors ends up with a one-third share of the property.
Breaking a Joint Tenancy Agreement
A joint tenancy is broken when one or more tenants sell their interest in the property. For example, one or more co-tenants buy out the others, the property is sold and proceeds distributed equally among the owners, or a partition action is filed, letting an heir sell his stake in the property.