Tenancy in Common refers to a legal arrangement between two or more parties to share ownership in a real estate deal. There is no limit to the number of people who may share ownership of a piece of property or land parcel.
What is Tenancy?
Tenancy means a group of people or entities that own an asset collectively. Types of Tenancy include
- Tenancy in common: This is a type of joint ownership where multiple owners have a distinct and divisible interest in the property.
- Joint tenancy: Joint tenancy is a type of joint ownership where each owner has an equal and undivided interest in the property.
- Tenancy by the entirety: Tenancy by the entirety, also known as tenants by entirety or tenancy in entirety, is a legal concept that applies to married couples who purchase property together.
- Community property: Community property allows a married couple to share equal assets through marriage and upon death the assets get transferred to the surviving spouse.
What Is ‘Tenancy In Common’ In Real Estate?
‘Tenancy in common’ in real estate refers to the type of ownership where two or more individuals own a property together. Here, every individual has a separate share of the property divided into equal parts or as decided.
In such type of contract, every individual owner has the right to use the entire property. However, each tenant in common is responsible for paying their individual share of expenses like maintenance, and repairs.
In case of a tenant’s death, their share of the property is transferred to their beneficiary.
Pros And Cons Of Tenants In Common
Owning a property in common can have several Pros and Cans.
- Flexibility: Tenants in common enjoy the flexibility to divide ownership shares. It would allow owners to earn a higher share if they could contribute more towards the property.
- Separate ownership: Every tenant has a distinct ownership share in the property.
- Estate planning: They have the advantage of transferring their share of ownership easily without any hassle. This is extremely useful in the process of estate planning.
- Responsibility for expenses: Every tenant needs to pay their share of expenses. In case, any one of the shareholders misses his payment then the rest of the shareholders might have to take the burden.
- Disagreements: Every mind thinks differently. Every shareholder might have different ways of maintaining the property which might lead to arguments.
- Involuntary co-ownership: In a tenancy in common, each owner’s share is passed on to their designated beneficiaries or heirs when they die. This means that one owner could end up owning a share of the property with someone they did not choose or did not expect.
Understanding The Different Ways To Own Property
There are several ways to own a property. Here are some of the most common ways to own property
- Sole ownership: In this, an individual person owns the property all by himself. They have complete control and decision-making authority over the property.
- Joint tenancy: In joint tenancy, two or more parties own the property in equal shares.
- Tenancy in common: Here, two or more people own the property with a separate share. Every individual can decide whether he wants to continue, sell or transfer the share to their beneficiary.
- Community property: Community property is where married couples own property jointly and each spouse has an equal share of the property. In case any one spouse dies the entire share goes to the other by default or unless mentioned in the will.
Joint Tenants vs Tenants in Common
|Services||Joint Tenancy||Tenancy in Common|
|Ownership||All owners have equal ownership, that is 100%||Each owner has his separate ownership share|
|Owner’s death||Ownership is transferred to the other owner||Ownership is transferred to its beneficiary|
|Transferability||All owners must agree to sell or transfer the property||The owner can decide to share, sell or transfer his share only|
|Liability||All owners are jointly and severally liable for the property’s debts||Each owner is only liable for their share of the property’s debts|
Tenancy in common is commonly used for investment properties or for family members who want to own a property together but want to have separate ownership shares.
Frequently Asked Questions
Can a tenant in common sell their share without consent?
Yes. Tenancy in Common allows the shareholder to sell or transfer the ownership without the other's consent.
How many people can be on a deed
There is no limit on the number of people to be on the deed. However, more shareholders have their own pros & cons.
What are the types of tenancy in real estate?
Types of the tenancy include 'Tenancy in common, 'Joint tenancy', 'Tenancy by the entirety and 'Community property'