How To Maximize Tenants in Common Agreement —  Expert’s Insights

Tenants in Common (TIC) agreements are essential to real estate ownership, providing a way for two or more people to own a property together. Co-tenancy or concurrent estate is an excellent way to hold property in common between two or more individuals. This arrangement is used by investors, business partners, and family members to create an ownership structure that can benefit all parties involved.

If you’re looking for the best way to adapt a TIC agreement for your needs, it’s crucial to understand the basics and pitfalls of such an agreement. In this article, I will share my insights into maximizing your Tenants in Common agreement and making it work for you.

How Do Tenants in Common Agreements Work?

A Tenancy in Common agreement allows two or more parties to own property jointly. Therefore, each tenant holds a separate and undivided interest in the property without the rights of supervision among other co-owners. Any owner may transfer and encumber the property interest without the consent of the other co-owners.

People may choose a TIC agreement when one of the parties would like to deed his portion of the property or take out a mortgage without obtaining the consent of other co-tenants. For instance, by using such an agreement, it is easily possible to inherit a share of the property of one of the co-owners. And there is no need to get the consent of other co-owners to pass a share of the property to children or other family members, for example.

9 Clauses To Include in Tenants in Common Agreement

When creating a TIC agreement, it is important to include the following nine clauses:

1. Recitals: A description and address of the property in question, percentage interest held by each Tenant in Common;
2. Transfer restrictions: A list of actions that each of the Tenants shall not do without the consent of the other Tenants;
3. Rights and obligations of the co-tenants: A detailed description of the Tenants’ rights and obligations for the property in question;
4. Income and liabilities: Benefits and obligations of each of the Tenants in Сommon re ownership of the property;
5. Improvement of property: Procedure for property modifications or renovations, if any;
6. Termination and term of the agreement: Procedure of the agreement’s termination by the parties as well as the term of the contract;
7. Liability clause: The liability of each of the parties for damages or violations of terms of the agreement;
8. Governing law and dispute resolution clause: Name of the party responsible for resolutions of the disputes between the tenants and reference to the law governing the agreement;
9. Binding effect of the agreement and amendments: A general clause stipulating the binding nature of the TIC and a procedure for making amendments to the Agreement.

Each of these clauses should be carefully drafted to ensure that the agreement is legally binding and covers all critical aspects of the arrangement. Tenants need to discuss the details of the deal before agreeing, as these details can significantly impact how the agreement works in practice.

Common Mistakes in Tenants in Common Agreement

The most common mistakes in TIC agreements are not negotiating specifics and not including all the details and terms in the document.

Such issues should always be discussed prior to entering into the TIC agreement, and the decisions made should be reflected in the respective provisions. 

A TIC agreement should be written in clear and understandable language to avoid misunderstandings or loopholes.

How To Maximize Tenants in Common Agreement

There are three general steps to draft a master Tenants in Common Agreement:

1. Communicate with the co-owners.
Discuss all potentially important issues regarding the future TIC agreement, such as: 

• division of the property between tenants;
• percentage interest held by each co-tenant; 
• transfer restrictions of the owned property;
• details about payment terms;
• owners’ financial obligations;
• payment of property taxes; 
• management of the property in question; 
• provisions governing the usage of the property; 
• peculiarities of decision-making procedure.

Such peculiarities and details are important for maintaining long-term future cooperation with your co-tenants. 

2. Draft a TIC agreement 
In addition to the nine clauses mentioned above, parties may consider adding more detailed specifications for the property in question. For example, it could include stipulations on additional rights and obligations, such as restrictions on property transfers and provisions governing the usage of the property by the co-owners.

Parties may consult with a qualified lawyer to ensure that all requirements are met and that the agreement is legally binding. However, consulting with a lawyer can be costly and isn’t required.

Alternatively, you may use a Tenants in Common Agreement template to draft a legal and high-quality agreement quickly. Such templates typically contain the nine clauses mentioned and more detailed specifications. Additionally, parties may customize the regulations to make the TIC contract work for their property.

3. Cover all issues
A person may seek legal advice from a qualified lawyer who can assist in drafting the TIC and advise on approvals. Parties can hire a lawyer to manage their agreement or schedule an online consultation with a legal specialist from Lawrina’s lawyer directory.

Conclusion

Tenants in Common agreements provide a great way to own property together with other people. When creating a TIC agreement, it is vital to include nine key clauses to ensure that the document is legally binding and covers all aspects of the arrangement.

Tenants can have the agreement reviewed by a legal professional to ensure that there are no loopholes or areas of confusion that could lead to problems in the future. Alternatively, parties can use a beeline — a ready-made template containing all the needed information and clauses. Such services can save time and money, eliminating the need to hire a lawyer to draft the agreement.

Also read:Tenants in Common: A Flexible Ownership Option for Multiple Investors

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