There are numerous ways to own a residential or commercial property, and occupancy in common is one of them. While it is an alternative, there are a few reasons why this type of plan might not be the very best way to protect realty.

In this post, we'll specify tenancy in common to offer you a good understanding of what it is and help you understand the involved dangers so that you are better geared up to choose whether it is the right alternative for you.

What Is Tenancy in Common?

There are lots of methods to own a property or commercial residential or commercial property, and occupancy in typical (TIC) is among them. Tenancy in Entirety and Joint Tenancy are two other types of real residential or commercial property ownership.

Tenants in typical consent to each hold an ownership percentage of the whole residential or commercial property, either an equal or different portion, and if among the joint occupants dies, their beneficiary will have the right to claim ownership of the residential or commercial property for the portion that their predecessor held instead of the joint tenant.

Furthermore, different times may be utilized to acquire an ownership interest in tenants in common. Consequently, occupants may be eligible to purchase an interest after a variety of years and at different times. Additionally, individual conveyances might be used to transfer ownership interests to each occupant in common.

How It Works

Owners who are likewise renters in common have rights and equal or unequal concentrated interest in every part of the residential or commercial property obtained with the same deed. However, each of the tenants might own a different percentage of monetary interest in the structure or piece of land.

Moreover, any occupant may individually sell or borrow versus their particular ownership interest. With regard to residential or commercial property tax and other residential or commercial property payments, all renters in common will get one bill. A well-drafted tenancy in common agreement will define the liability of each tenant with regard to residential or commercial property taxes.

Why Tenancy in Common Can Be Beneficial

A structure or piece of land may be owned jointly by 2 or more parties under this type of legal plan.

The primary characteristic of a tenancy in common is that each company partner keeps the option to leave their particular shares of the residential or commercial property to their descendants while also being able to offer their respective portions of the residential or commercial property.

Although there are sure benefits, the joint tenancy of this kind also provides a number of risks. We'll explore these dangers in the next area.

The Problems with This Kind of Joint Tenancy

It is necessary to comprehend the threats involved before getting in into this type of co-ownership arrangement. Let's look at a few of the problems or disadvantages connected with tenancy in common.

Joint and Several Liability

Each renter in typical is an asset of each co-owner and is accountable for the financial obligations of all other owners. Our company believe that taking that type of risk would be unreasonable for an investment. You must also worry about the other co-owners' financial institutions in addition to your own.

Every Co-owner Has the Same Ownership Rights

The most significant issue with renters in typical is that they have total liberty over how they use their fractional ownership interest in the residential or commercial property. Among the joint owners may obtain money against their share of the residential or commercial property. The interest held by one owner is also subject to the lenders of that owner.

No Direct Right of Survivorship

If there is no will in place clearly specifying the transfer of ownership to a beneficiary, relative can not declare the right to the part the departed tenant in common owned.

Tenants in Common Are Free to Resell Their Portion

Existing renters in common might discover that they now share ownership of the residential or commercial property with a brand-new co-owner who might not completely comprehend the inspiration for the investment and how it works. The brand-new renter might require the present co-owners of a residential or commercial property to sell it by submitting a partition action claim.

How Can You Mitigate These Risks?

If you prefer this way of owning residential or commercial property, the great news is that there are ways you can prevent these problems.

Do Your Research About Every Co-owner Before Participating In an Agreement

Joint tenancy can present numerous risks, so it is very important to discover as much as you can about individuals you're getting in into a contract with. If you understand that a joint renter has a gaming problem or a bad credit score, for instance, you ought to hesitate about the joint occupancy plan.

Use a Well-drafted Agreement

The renters can prevent many disadvantages in typical by signing a well-drafted written agreement. This is why it's vital to have a tenants-in-common arrangement produced by a genuine estate lawyer.

A clause in the agreement might approve the co-owners the legal right to decline on the occasion that one of them chooses to offer. The authority of the co-owners to approve or decline prospective buyers may likewise be covered under the contract to safeguard existing occupants.

Ensure You Have a Will in Place

Another way to ensure that your heir gets ownership of your part of joint occupancy is to make sure that you have a well-written will in place that can not be easily challenged. We suggest getting sound legal guidance to guarantee that you are doing the very best you can to protect your assets in case of your death.

Get Sound Legal Advice

It's also important to look for dependable legal counsel from a knowledgeable lawyer that deals with realty transactions. She or he can help you determine any prospective issues and offer solutions to assist alleviate risks.

The Bottom Line

Although tenancy in common might look like a beneficial option for owning realty, there are several drawbacks that you need to be familiar with. Joint liability, the lack of right of survivorship, and more could make this kind of arrangement dangerous.

Fortunately, there are steps you can require to prevent or reduce the risks included. We advise looking for legal counsel before choosing whether tenancy in typical is the proper way to go.

If you require assistance managing your residential or commercial property, you can turn to DoorLoop. With innovative functions to aid with your accounting, lease collections, and contract production, you can maximize your occupancy in typical arrangement.

Want to find out more? Find out more about the laws in play in your state and download the free forms you need for your rental service.

Frequently Asked Questions

David Bitton brings over twenty years of experience as an investor and co-founder at DoorLoop. A former Forbes Technology Council member, legal CLE & TEDx speaker, he's a best-selling author and thought leader with mentions in Fortune, Insider, Forbes, HubSpot, and Nasdaq. A devoted married man, he takes pleasure in life in South Florida with his better half and three children.

The information on this website is from public sources, for informative purposes only and not planned for legal or accounting advice. DoorLoop does not ensure its precision and is not responsible for any damages or inaccuracies.