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The US 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 tenants in common agreement example can outline what percentage of legal partition each tenant owns or who will inherit shares upon a tenant’s death.
People have different reasons for entering into a tenancy in common agreement. The primary reason is high real estate prices. Co-ownership enables tenants to take out a split-percentage loan and individual mortgages on their shares because each buyer’s overall cost is lower. Some people opt for tenancy in common to sell a fraction of the property to different buyers. The type of arrangement you enter into entirely depends on you and your reason for purchase.
Here are the key points to remember before signing a tenants in common agreement template:
- Tenancy in common enables the tenants to own separate interests in the property but not its parts;
- Each tenant’s share of taxes and other expenses should be negotiated up front;
- Each property owner has equal rights to the entire real estate object but different partitions of the shares;
- Not all tenants have to live on the property, but the tenant cannot rent, gift, or even sell his or her shares;
- A person can assign a relative, partner, or close friend to a joint tenancy;
- If one tenant dies, his or her interest will pass on to his or her heir(s).
During negotiations, consider the following essential terms to mention in your tenancy in common agreement sample:
- What percentage of a share will each co-owner have?
- What benefits will be enjoyed after obtaining the common tenancy?
- What happens if one of the tenants decides to sell the property or his or her share?
- How will the parties be indemnified against potential losses?
Also, see these simple steps of how to write a tenants in common agreement, and then negotiate it:
- 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 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. You may even choose to include an indemnification clause to indemnify co-owners against a variety of potential issues.
After you sign a Tenants in Common Agreement, you can arrange your real estate purchase on more explicit terms with the other party. This legal document will help to protect your tenancy rights and interests whenever needed.
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A TIC agreement template is the contract that indicates the terms of a co-ownership for tenants in common. This agreement will contain the tenants’ rights and legal obligations as agreed by the parties.
The purpose of a tenancy in common agreement is to clearly define each joint owner’s shares of a property. It protects each owner’s interests and ensures no future complications regarding his or her rights.
A tenancy in common agreement and joint tenancy agreement may sound the same, but they have some differentiating features. You can contact a legal professional to advise you on which co-ownership structure is best for your situation. All answers may vary depending on your state, and you should discuss these questions during a consultation.
If you are going to purchase 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 that you can sell or hand over your shares. We recommend speaking to a licensed attorney who can help you navigate the process.