What does 'Tenants In Common - TIC' mean
Tenants in common (TIC) are co-owners who each own a separate and undivided interest in the same real property and have an equal right to the possession and use of the property. Upon the death of one tenant, the undivided interest passes to the tenant's heirs through a probate proceeding; the interest does not pass to another tenant in common unless the surviving co-owner is an heir or a purchaser.
BREAKING DOWN 'Tenants In Common - TIC'Other forms of concurrent ownership include joint tenancy and tenancy by the entirety.
Tenants in common is one way two or more related or unrelated individuals may hold unequal shares of a property. For example, Leticia may hold a 40% share of a property while Sarah holds a 35% share and Paul holds a 25% share. The deed lists specific ownership interests for each co-tenant. Because of the financial and legal risks involved with unmarried individuals entering into a tenants in common arrangement, it the individuals should consult an account and/or real estate lawyer before purchasing a property.
Pros and Cons of Tenants in Common
Buying a home with a family member, friend or business partner as tenants in common may help individuals enter the property market more easily. Because deposits and payments are divided, purchasing and maintaining the property may be less expensive than it would be for an individual. Also, borrowing capacity may be greater when one individual with a greater income owns a larger percentage of the property than a lower-income borrower. In addition, a co-tenant may use a will for designating which heir receives his interest in the property, giving the co-tenant more control over his share.
However, when mortgaging a property as tenants in common, typically all borrowers sign the documents. That way, the lender may take over the entire property, rather than part of it, in case of default. If one or more borrowers ceases contributions to the mortgage payment, the other borrowers must cover the payments to avoid foreclosure. Also, if a co-tenant dies without a will, his interest in the property goes through probate, a costly event in terms of time and money. In addition, the remaining co-tenants may own the property with someone they do not know. Furthermore, a tenant in common may file a partition action, forcing unwilling co-tenants to sell the property.
Dissolving Tenants in Common
One or more co-tenants may buy out another to dissolve the tenancy in common. A co-tenant may file a partition action if the other co-tenants are unwilling to sell. When the property is sold, the proceeds are divided among the co-tenants according to their interest in the property.