A Tenancy-in-Common (or TIC) serves as a way of sharing ownership of real estate or property amongst more than one individual. It may be established through deed, will, title, or through other documents, when the ownership of a single property is bestowed upon more than one person. In other words, in TICs, each individual holds an undivided but fractional interest in the property.
Advantages of Tenancy-in-Common Ownership
In most 1031 exchange transactions, property swappers often look to move into a TIC due to the many significant advantages to landowners. For example, TIC structures permit people who wish to diversify to invest in various types of investment properties, larger chunks of real estate, and in different geographical markets. Also, a TIC tag helps to avail fixed-rate, non-recourse financing in institutional terms, which otherwise might not be possible for small scale single investors. Further, TIC’s do not prevent a person from acquiring his/her own investment real estate in a subsequent 1031 tax deferred exchange. In other words, going back to sole ownership is still an option.
Even though TIC ownership is a combined ownership, TIC ownership can still be purchased, sold, inherited, bequeathed by will, and is subjected to property tax, gift tax, inheritance tax, and estate tax, in the same way as any other single owner property is treated. Upon the expiry of the tenant, the person’s interest in the property passes to his/her heirs through a will or relevant real estate documents, and does not get divided amongst other TIC owners. That is, there is no survivorship in Tenant In Common as in the case of joint tenancy ownership.
Regarding rights in a Tenancy-in-Common, each tenant has unrestricted and equal rights to access the property subject. Further, each TIC can petition for and subsequently secure the partition of the property at any time sans any restriction. On partition, the petitioner gets sole right of ownership of the partitioned real estate that the court views as his/her rightful share in the prior undivided interest. In some cases, the court may order the property be sold, and the resulting money be shared amongst all tenants in common in the same proportion as their ownership interests were. But this is a last resort when all other steps to divide the property fail.