Tenants in Common Agreement

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A tenants in common (TIC) agreement is a contract where two or more people set out their legal ownership rights, obligations, and terms of property management. This agreement can outline what percentage of legal partition each tenant owns or who will inherit the tenant’s shares upon his or her death. Download this printable TIC sample from Lawrina and edit the form to your desired terms.

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Template Description

With property prices steadily rising, many people are choosing to share the costs of purchasing real estate, whether commercial or residential. Many are now opting for tenancy in common and other unconventional shared ownership structures to increase their buying power and get the most out of their purchases.

You may be considering splitting the cost of your first or subsequent house purchase with your family, best friends, or spouse or partner. If this sounds like you, you need a tenants in common agreement to protect your interests now and in future. Below is a standard guide to a tenants in common agreement that you can use as a template as is.

What Is a Tenants in Common Agreement (TIC)?

A tenants in common agreement (also known as a TIC agreement) is a contract where two or more people who have ownership interests in a particular real estate property set out their general legal rights and obligations in respect of that property, as well as terms relating to the management of the property. The agreement can outline what percentage of legal partition each tenant owns, or who will inherit their individual percentages upon the death of any of the co-owners. In simple terms, a TIC agreement is a kind of partnership in real estate ownership.

Parties of the Tenants in Common Agreement

happy family

Since a tenants in common ownership model can mean that the parties do not hold equal shares in the property, and the overall value of the property will not automatic be divided equally among the co-owners, this can be useful where one owner has a greater stake in the property, such as:

  • Family members –– When one family member wants to help out another family member, they may decide to purchase and own property together. Ownership can be unequally divided, which means that the property passes to the deceased's estate, not automatically to the surviving owner upon the death of one owner.
  • Friends –– When friends hold a real estate title as tenants in common, they tend to each have the same interest in it. The interest can be equally or unequally split if you purchase a property with two friends, for example. This could mean that each of your two friends owns 25% of the property, while you own the remaining 50%.
  • Unmarried couple –– When one person in a couple earns a higher income than the other, they may decide to own property together before getting married. Ownership can be unequally divided between the partners, so that if one of them dies, the deceased's share of the property goes to their estate, not to the surviving partner.

Key Terms

  • Tenants in common –– Two or more parties sharing ownership interests in a real estate property.
  • Recitals –– The property description, including the type, location, purpose.
  • Proportionate share –– The percentage of a tenant’s ownership of the commonly held property.
  • Transfer restrictions –– The limitations on sharing the undivided interest of a tenant by transferring it to any third parties.
Insight

The term “conveyance” refers to transferring property from one party to another. The term is commonly used in transactions with real estate, when parties transfer ownership to real property, such as land, building, etc. 

How Tenancy in Common Works

When you have a tenancy in common, it means that the property ownership is shared between at least two people. 

tenants shaking hands
  • Tenants in common do not own separate parts of the physical property. Rather, they own separate interests in the property.
  • Tenants in common do not have to be related. They can be family, a couple, or just friends. They can also be two partners launching a business venture.
  • Each owner has equal rights to the entire property, but they own different partitions of the shares.
  • Percentages can be shared equally between the co-owners, or one owner can own a greater percentage of ownership than the others. You and the other owners need to determine your respective ownership shares during the process of purchasing the property.
  • Not all tenants have to live on the property.
  • You cannot rent, gift, or even sell your shares in the property.
  • If one tenant dies, their interest will pass on to their heir through their estate. For example, it may pass on to the deceased’s spouse or other such beneficiaries.
  • Tenants can agree to have contingency funds to pay for common expenses, to share expenses such as taxes according to their individual percentages, or to pay for expenses in agreed proportions. 
Insight

When a couple buys a property together, they can sign a TIC agreement, which primarily protects the interests of each owner. It can also be signed by family members or friends. People who wish to define their share of the property and pass it on to their heirs in the event of their death may find the tenants in common agreement beneficial.

Types of Tenancy in Common Arrangements

People have different reasons for entering into tenancy in common arrangements. Perhaps they can’t afford to purchase the property on their own, or the structure will lead to an enhancement in their buying and selling power. Entering into this type of arrangement will allow for more choice because the cost is lower for each individual buyer since they can pool their funds.

Insight

Banks have even begun to offer loans for split ownership percentages when purchasing a property. Co-owners can take out individual mortgages on their shares, decreasing the risk for joint buyers and lowering the risk of foreclosure. There are separate rules and requirements for specific types of property, such as a holiday home or investment property compared to a family home.

Some people create a TIC agreement because it allows them to sell a certain share of the property to different buyers at a given time. The total sale price is typically more than what they would have sold the entire property for to a single buyer. The type of arrangement you enter into entirely depends on you and your reason for purchasing a real estate property. 

Tenancy in Common

A tenancy in common is where two or more people own an asset as a group but none of these owners have any survivorship rights. This is where an owner dies and their share passes to the other surviving owner or multiple owners.

Since this is not the case for a tenancy in common, the result is that the entire asset does not automatically pass onto the surviving owner/s. Instead, an asset, such as a home, is split between tenants who each own their share, which passes to that tenant’s estate when they die. Typically, tenants split up ownership on a 50-50 basis, but they could also split it 60-40, 70-30, 80-20, or any other way they choose.

Joint Tenancy

In a joint tenancy, you and your spouse or common-law partner own assets as if you were one person. As a result, both of you have equal rights over the asset, as well as equal obligations.

couple unpacking things

Tenancy by Entirety

The concept of tenancy by entirety (TBE) refers to married couples holding an equal interest in property and survivorship rights, which means their property is not subject to probate. It is not 50/50 ownership; each spouse owns 100% of the property.

How To Write a Tenancy in Common Agreement

Coordinate with all other parties

You must communicate with the other parties you intend to purchase the property with before drafting a TIC agreement. This will help you decide whether or not this co-ownership structure is right for you before you go ahead with the purchase.

Negotiate essential terms of the contract

The share held by each co-owner, along with other factors, determine tenants' percentages. Using the TIC agreement template to guide you through this process, you can decide on other major terms, such as what happens if one co-owner sells or if the property increases in value. Including an indemnification clause in your agreement protects your co-owners from liability in certain situations. The tenancy in common agreement template form is easy to customize and printable, so you can just fill in the blank parts on Lawrina and download a complete template.

Tenancy in common agreement forms must include the following provisions:

  1. Introduction
    An agreement can include a statement of the parties' signing locations and dates. There should also be a clear statement that they are "tenants in common" as opposed to any other form of ownership. The parties’ names, positions, and the nature of the agreement should be included.
  2. Recitals
    In this section, tenants can provide information about the property, such as the address, description, and use.
  3. Term
    Specifies when the tenancy begins and ends.
  4. Payment
    Parties can specify how the initial payment will be made to purchase the property and how the property shares will be divided among the parties.
  5. Further Contributions
    If additional investment in the property is required, the parties can include information about how these contributions are to be made and how much each party will contribute. A TIC agreement can specify how each party will pay the mortgage or any other loan. The amount of each party's contribution is usually based on the amount they paid initially.
  6. Other Provisions
    The agreement can also include other clauses, including the governing law, representatives, indemnification clauses, and more.
  7. Signatures
    The parties should sign and date the document at the end of the agreement.

How To Terminate Your Tenancy in Common

If you wish to end your fixed-term joint tenancy, you must simply get the approval of your landlord and consent from the other tenants. When you end your tenancy, it ends for everyone, as mentioned in the agreement. It is necessary to get all tenants' consent to end a joint tenancy with a break clause unless your agreement states otherwise.

Tenancy in Common vs. Joint Tenancy

A joint tenancy agreement and a tenancy in common agreement are structurally different, including the differences set out below:

  1. Joint tenants have equal shares in the property, and this ownership structure is more akin to a partnership. Although this may be the case in a tenancy in common agreement, it is not a requirement. 

  2. In a joint tenancy, if a party wishes to sell their interest, this breaks the agreement. However, in a TIC agreement, a change in parties will not break the agreement. 

  3. In a joint tenancy, if the co-tenant dies, the interest of the deceased, as specified by the property deed, will pass to the surviving owner. However, in a TIC, the interest is in the deceased’s estate.

Warning

The courts will typically interpret a conveyance as creating a tenancy in common rather than a joint tenancy if it does not explicitly indicate the intention to create a right of survivorship. It can be unclear whether the conveyancer intended to create a tenancy in common or a joint tenancy.

Property Taxes With Tenancy in Common

Regardless of how you decide to structure your ownership of the property, there will be tax implications. As joint tenants, you are equally liable for the property's taxes. 

Insight

Almost all jurisdictions require tenants in common to pay their property taxes as tenants in common. In most jurisdictions, each independent owner may be responsible for up to the full assessment amount. The tenants in common will receive a single property tax bill that will have to be sorted between them.

The implication is that co-tenants are jointly liable for the taxes, meaning that they are each liable for the full amount regardless of their ownership percentage. If this is the case, the co-tenant can deduct the amount they contributed. If this is not the position in the relevant tax jurisdiction, then the applicable state laws will apply. The tenants can pay and deduct taxes up to the amount of their percentage of ownership, if they so decide.

How To Use This Tenants in Common Agreement Template

TIC agreements outline the rights, obligations, and management terms of property owned by two or more people. A TIC agreement can help individuals purchase property at a lower price since many people choose to share real estate costs. Tenants may choose to make a tenant in common agreement example to specify what their legal ownership percentage each of them will have or who will inherit their share of ownership on their death. This tenancy in common agreement sample by Lawrina is a helpful tool to protect your property entitlements.

Common Use Cases

  • By signing this agreement, the joint tenancy is "severed," and the sale proceeds of the real estate property are divided among the owners.
  • Whether you are married or in an unmarried cohabiting relationship, you will likely want the reassurance that if you separate, you will each get back the money you invested in a property you purchased together.
  • Buying a house together is common for couples, friends, or family members to get on the property ladder and become homeowners.
  • Property management, which protects the individual interests of each owner, is not covered in this document.

When Not To Use a Tenancy in Common Agreement

Using a joint tenancy agreement is a smarter option when purchasing a home with a spouse or partner. This way, if one of you passes away, the other keeps the property. Other benefits of a joint tenancy include:

  • Probate fees can be avoided since the property is transferred to the surviving owner(s) under the right of survivorship.
  • Joint tenants are entitled to full use and possession of any properties they own.

State Law

Property law can have particular rules about the language required to deal with certain types of homeownership. Below are the state laws across the U.S. regulating tenancy-in-common and joint tenancy relations. 

State Law
Alabama

 Ala. Code § 35-4-7

State Law
Alaska

Alaska Stat. 34.15.110

State Law
Arizona

ARS § 33-431

State Law
Arkansas

Ark. Code § 18-13-113

State Law
California

Cal. Civil Code § 685

State Law
Colorado

Colo. Rev. Stat. § 38-31-101

State Law
Connecticut

Conn. Gen. Stat. § 47-14a

State Law
Delaware

Del. Code Ann. tit. 25, § 311

State Law
Florida

Fla. Rev. Stat. Title XL § 689.15

State Law
Georgia

GA Code § 44-6-120

State Law
Hawaii

Haw. Rev. Stat. § 509-2

State Law
Idaho

Idaho Code §§ 55-508

State Law
Illinois

765 ILCS 1005

State Law
Indiana

IC Title 32-17-3

State Law
Iowa

Iowa Code Ann. § 557.15

State Law
Kansas

K.S.A. 58-501

State Law
Kentucky

Ky. Rev. Stat. § 381.120

State Law
Louisiana

La. Stat. tit. 9 § 1711.1

State Law
Maine

Me. Rev. Stat. Ann. tit. 36 § 555

State Law
Maryland

Md. Code Ann § 4-108

State Law
Massachusetts

Mass. Gen. Laws Ann. ch. 184, § 7A

State Law
Michigan

Mich. Comp. Law § 700.2901

State Law
Minnesota

Minn. Stat. Ann. § 500.19

State Law
Mississippi

Miss. Code Ann. § 89-1-7

State Law
Missouri

Mo. Rev. Stat. §§ 442.025

State Law
Montana

Mont. Code Ann. § 70-20-105

State Law
Nebraska

Neb. Rev. Stat. § 76-118

State Law
Nevada

NV Admin Code 375.128

State Law
New Hampshire

NH Rev Stat § 477:18

State Law
New Jersey

NJ Rev Stat § 46:3-17

State Law
New Mexico

NM Stat § 47-1-36

State Law
New York

NY Est Pow & Trusts L §§ 6-2.1, 6-2.2

State Law
North Carolina

N.C. Gen. Stat. § 6-41-71

State Law
North Dakota

N.D. Cent. Code § 47-02-08

State Law
Ohio

Ohio Rev. Code Ann. § 5302.19

State Law
Oklahoma

60 OK Stat § 60-74

State Law
Oregon

ORS Volume 03, § 93.180

State Law
Pennsylvania

15 PA Cons Stat § 8422

State Law
Rhode Island

RI Gen L § 34-3-1

State Law
South Carolina

S.C. Code §27-7-40

State Law
South Dakota

S.D. Codified Laws Ann. § 29A-6-302

State Law
Tennessee

Tenn. Code Ann.Title 66, chapter 1, part 1, § 66-1-107; 
Title 61, part 2, § 66-1-202.

State Law
Texas

Tex. Est. Code §101.002

State Law
Utah

Utah Real Estate Code § 57-1-5

State Law
Vermont

Vermont Statutes, Title 9, chapter 134, § 4352 

State Law
Virginia

Va. Code Ann. § 55.1-135

State Law
Washington

RCW 64.28.020

State Law
West Virginia

WV Code § 36-1-19

State Law
Wisconsin

Wis. Stat. Ann. §§ 700.19; 700.20

State Law
Wyoming

WY Stat § 34-1-140

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Frequently Asked Questions

What is the main difference between joint tenants and tenants in common?

There are many differences between a joint tenant and a tenant. Joint tenants have equal shares in the property, while tenants in common have different ownership shares. 

The main difference, however, between these two kinds of tenancy concerns the death of a tenant. In tenancy-in-common, the death of a tenant transfers the rights of ownership to their estate in favor of his heirs. In joint tenancy, ownership automatically passes to the co-tenant.

When a tenant in common dies, what happens to the tenant's interest in the estate?

When a Tenant in common dies, their ownership share is passed on to that tenant’s estate and handled according to the deceased tenant’s will. Any surviving tenants continue owning and occupying their share of the property. The heir is then placed in the position of the deceased tenant with the same rights and responsibilities. The surviving tenants still have the same ownership they had before and may continue the tenancy agreement with the heir.

What is the purpose of a tenancy in common agreement?

Tenancy in common is a legal arrangement in which two or more parties jointly hold the tile and own a share of the property, such as a building or piece of land. The key feature is that either party can sell their share of the property and reserve the right to pass on their share to their heirs. The share size of Tenants in common may vary between the co-tenants, and ownership can be transferred without interference.