When it comes to property with title, there are different ways you (and other people) can own title. The type of title ownership you have with property or securities will influence legal ownership of the property as well as how the property is transferred after a title owner passes away. Tenancy in common is one of the types of ownership that may be appropriate when the title owners have not equally contributed to the obtaining the property.
How Tenants in Common Works
Tenants in common is one of the ways you can own property with two or more individuals. There’s no limit to the number of people who can hold title. It can be two people or it can be 50 people, or even more.
Parties don’t have to be related to hold a tenancy in common title. Family members can be tenants in common. So can friends and business partners.
Unlike joint ownership, the owners don’t have to have equal shares of property. For example, if there are two tenants in common, the tenants don’t necessarily have to have 50-50 ownership of the property. Likewise, four owners don’t have to each own 25% of the property. Ownership can be divided however the parties decide. For example, if there are four owners, Jack could own 15%, John own 20%, Judy own 30%, and Jane own 35%.
Tenancy in Common Rights and Responsibilities
All co-tenants have the right to access the property, regardless of the distribution of ownership. One party can live in the property alone or the parties can share the property, depending what the parties decide. None of the parties have the right to exclude any of the other parties. An excluded co-tenant may be able to receive monetary compensation for the amount of time they were denied access.
If the property generates income, each co-tenant is entitled to a share of the income based on their share of the title. For example, in a 25-75 split ownership, one co-tenant would receive 25% of the property’s income while the other would receive 75%.
Co-tenants are also responsible for paying the cost of the property including mortgage and property taxes. As with receiving income, co-tenants pay their share of expenses based on their share of the title.
In their will, the co-tenants should designate someone to assume ownership of their share of the property. When a co-tenant passes away, their portion of the property rights would pass on to the person named in the will. All co-tenants continue to maintain rights to the property as named in the title, except the co-tenant named in the will. That surviving partner would assume ownership of the deceased co-tenants interest in addition to what they already own.
Ending a Tenancy in Common
You can dissolve a tenancy in common title ownership agreement by buying out the co-tenants. The tenants would agree to give up their share of the property for a sum of money. You can also sell the property and divide the proceeds among the co-tenants according to their share of the title.
If the co-tenants don’t agree to sell the property, one of them can request a court order to sell the property and distribute the proceeds. This is known as a partition action and often happens when one of the co-tenants passes away and the surviving co-tenants do not agree to the future of the property. One co-tenant may want to sell the property while the other co-tenants want to keep it. The court will generally grant a partition request unless the co-tenants have previously agreed to waive that right.