Tenants in Common Agreement Template

Property prices are rising steadily, and many people are choosing to share the costs of purchasing real estate, whether commercial or residential. These people 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 might be considering splitting the cost of your next house with your best friends or partner. If you’re a step or two away from buying a property with another person and you need a Tenants in Common Agreement to protect your interests. Use this tenants in common agreement template as a guide.

What Is a Tenants in Common Agreement (TIC)? 

A tenants in common agreement (also known as TIC agreement) is a contract where two or more people who have ownership interests in property set out their legal rights and obligations, as well as terms relating to the management property. The agreement can outline what percentage of legal partition each tenant owns, or who will inherit their individual percentages upon death. 

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How Tenancy in Common Works? 

When you have a tenancy in common, it means you own the property together with one or more people. 

• Tenants in common don’t own separate parts of the physical property; however, 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 beginning a business venture.
• Each owner has equal rights to the entire property, but different partitions of the shares. 
• Percentages can be shared equally, or one owner can have more than the others. You and the others determine this when you are going to purchase the property. 
• Not all tenants have to live on the property and you can’t rent, gift, or even sell your shares. 
• If one tenant dies, their interest will pass on to their heir. 
• Tenants can agree to have contingency funds to pay for common expenses, share expenses such as taxes, according to their individual percentages, or pay for expenses in the proportions they agree on. 

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. Banks have even begun to offer loans for the split percentage of the property, and co-owners can take individual mortgages on their shares, decreasing the risk for joint buyers and lowering the risks of going into foreclosure.

Some people may enter into this kind of agreement because it allows them to sell a fraction of the property at a time to different buyers, the total cost typically being more than what they would have sold the entire property to one buyer. The type of arrangement you enter into entirely depends on you and your reason for purchase. 

Tenancy in Common vs. Joint Tenancy 

A Joint Tenancy Agreement and a Tenancy in Common Agreement are structurally different. 

• Joint tenants have equal shares of the property and that ownership structure is more of a partnership. Although this may be the case in a tenancy in common agreement, it is not a requirement. 
• In a Joint tenancy, if a member wishes to sell their interest, this breaks the agreement. However, in a TIC agreement, a change in members will not break the agreement. 
• In a joint tenancy if the co-tenant dies, the interest of the deceased based on the deed passes to the surviving owner. However, in a TIC the interest is in the deceased’s estate. 

Property Taxes with Tenancy in Common 

Although co-owners will have determined in their tenancy in common agreements what percentages of the property they own, the property will still be viewed legally as a single unit.

Most tax jurisdictions use this approach. and tenants in common will receive one property tax bill. The implication is that the 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, and they can pay and deduct taxes up to their percentage of ownership if they so decide. 

How to Write a Tenants in Common Agreement 

Coordinate with the counterpart 

Before you draft a Tenants in Common Agreement, it is necessary that you communicate with the other parties you intend to purchase the property with to ensure that you are all on the same page. This will help you decide whether or not this co-ownership structure is what is best for you all. 

Negotiate essential terms of the contract 

The most important part of your tenants in the common agreement is certainly what percentage of shares each co-owner is going to have. The money you and the other owners contribute or other factors may influence the decision, You will also need to agree on other main terms, such as what happens when one co-owner wants to sell or what benefits you will each enjoy regarding the property and you can use the FREE tic agreement template to guide you through this. You may even choose to include an indemnification clause to indemnify co-owners against a variety of potential issues. 

Tenants in Common Agreement Example

You can look at the example of the common agreement below while downloading PDF file or search for other examples online. The examples will help you to ensure you know what the common agreement includes and do not miss any key detail.

Tenants in Common Agreement Template (Free Word & PDF Files) 

Since you have a clearer understanding now of what a Tenants in Common Agreement is, you can download this FREE Tenants in Common Agreement PDF or word document and edit it to your desired terms to get started.

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