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.
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.
When you have a tenancy in common, it means you own the property together with one or more people.
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.
A Joint Tenancy Agreement and a Tenancy in Common Agreement are structurally different.
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.
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.
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.
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.
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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Frequently Asked Questions
A tenants in comment document is the contract that indicates the terms of a co-ownership for tenants in common. This document will contain their rights and legal obligations as agreed. You can check out the FREE tenancy in common agreement sample to get started.
The purpose of a tenancy in common agreement is to clearly define each joint-owner’s shares of a property. This protects each owner’s interests and ensures there are no future complications regarding their rights.
No, a tenancy in common and joint tenancy agreement are not the same. They may sound the same, but they have several differentiating features, and you may want to contact a legal professional to advise you on which co-ownership structure is best for you. All these answers may vary depending on your state and should be discussed during a consultation. If you are considering purchasing property with other people, you should consider a tenancy in common as an ownership structure option. Entering into a tenants in common agreement is a more flexible way to ensure that your legal rights in the property are protected and you can sell or hand over your shares, unlike if you and your co-owners entered into a joint tenants agreement. It is advisable to speak to a licensed attorney to help you navigate the process.