Tenancy in common (TIC): What is it and how does it work?

Tenancy in common is an important legal concept to understand if you’re thinking of buying a home with a friend or a partner you’re not in a romantic relationship with. Also known as TIC, tenancy in common allows two people to buy a property, own unequal shares in it, and pass their share to someone other than the other owner.

Key takeaways:

• Tenancy in common is a legal arrangement in which two or more unrelated people own a property.
• Both parties can use the entire property even if they have unequal ownership shares.
• A TIC has no right of survivorship, meaning that if one owner dies, their share passes to their designated heirs or beneficiaries rather than to the other owner.

What is tenancy in common?

Tenancy in common is a legal arrangement where two or more people share ownership of a property.

TIC allows you to buy property with any other person, regardless of your relationship with them. This may apply if you’re buying a house with someone you’re not married to. This is more common than you might think, as data from a JW Surety bonds survey states that 15% of Americans have bought property with someone other than their romantic partner.

TIC also has no right of survivorship. If one owner dies, their share of the property passes to their beneficiaries or heirs rather than to the other owner. Essentially, each person’s share of the property is treated as a separate entity, also known as an undivided interest.

Each owner can do as they please with their share, including selling, transferring, or borrowing against their share of the property. This means your co-owner may sell their share, and you’ll co-own a property with someone you don’t know.

The terms of the TIC agreement may grant the other owners the first right to buy the shares or force a sale of the entire property. An owner who wants to leave a TIC agreement can file for a legal partition agreement, and a court will decide how to split the property or require it to be sold.

TIC example

Say two friends buy a lake house for $400,000. One of them pays $150,000, and the other pays $250,000. That means the first friend owns 37.5% of the house, while the second friend owns 62.5%. Despite their different ownership shares, both friends can use the entire property.

If the first friend dies, they can leave their share to a relative instead of it automatically transferring to the second friend.

Can another person be added to a tenancy in common agreement?

Yes, another person can be added to a TIC agreement. All parties must agree to the addition, and the deed must be updated and recorded.

Pros and cons of tenancy in common

Consider the pros and cons of a TIC agreement before committing to one.

Pros of TIC

• Since you can enter a TIC with anyone, it serves as an alternative for buying property when other arrangements are not feasible.
• The number of people involved can change over time.
• Each party can own a different share of the property.

Cons of TIC

• All tenants are equally liable for debts and property taxes.
• It only takes one tenant to force the sale of the property.
• You don't automatically inherit the property rights of a fellow tenant upon their death. That said, you can designate the other tenant as your beneficiary for the property rights, which will ensure they inherit your property rights upon your death.

Alternatives to TIC

Tenancy in common is one of many ways you can acquire and own property or shares in a property. Here’s a look at some alternatives to TIC:

• Tenancy in severalty. Sometimes referred to as ownership in severalty, this form of ownership means that one person owns the entire property. This gives them complete control over all aspects of the real estate. Essentially, this is the polar opposite of tenancy in common.
• Joint tenancy. Like TIC, joint tenancy means there are two or more people that have ownership of a property. Unlike TIC, all parties have equal ownership shares, and these shares automatically transfer to the other tenants upon the death of one of the parties.
• Tenancy by the entirety. Available only to married individuals, tenancy by the entirety means that each owner has a complete and undivided ownership interest in the property. If one spouse dies, the other inherits full ownership.

FAQ

Here are answers to common questions about tenancy in common.

How do property taxes work with being tenants in common?

Both owners are responsible for the full tax bill associated with the property. That means if one doesn’t pay, the other is responsible for the full bill, even if they have a smaller ownership percentage. Who pays what should be defined in writing up front. An explicit TIC agreement that outlines who pays what percent of the property taxes at the time of purchase is essential.

Can tenancy in common be dissolved?

Yes, you can dissolve a tenancy in common a few ways.

• Selling the property and splitting the proceeds according to ownership shares.
• Buying a co-owner’s shares and distributing them to the remaining owners.
• Filing a partition action in court. This is necessary when the co-owners of a property can’t come to an agreement on their own.

What are the responsibilities of tenants in common?

The responsibilities of tenants in common are not unlike the responsibilities of any property owner, just shared. These include paying the mortgage, taxes, and other property expenses, such as utilities, maintenance, and repairs. Perhaps most importantly, each tenant in common is responsible for fulfilling their duties as outlined in the TIC agreement.

The bottom line: Tenancy in common can help you achieve homeownership

Tenancy in common offers flexibility in terms of who you can buy property with, and expenses are shared, but other tenants can force the sale of the property and all tenants are equally liable for the property taxes and other debts like the mortgage.

Have you weighed the pros and cons and are ready to dive in? Apply for initial approval with Rocket Mortgage^® and start the home buying process today