If you’re considering purchasing property with a family member or friend, you’ll need to do some planning. One of the first questions you’ll need to resolve is how you’ll hold title to the property. One way of holding title is as “tenants in common” (TIC). What are tenants in common and what are the advantages of this form of ownership?

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Tenants in Common

When more than one person owns a piece of real property, they can own it together as tenants in common. This gives each “owner” the undivided right to their interest (percentage) of the property, but to their interest only.

So, for example, say you decide to buy a house with your best friend, and you each put up 50 percent of the equity. If you decide to take title as tenants in common, then you own 50 percent of the property. Each of you has the “right of partition” and can transfer, mortgage, sell, or assign your interest. So, after the purchase, your friend can sell her interest to someone else, and there is really nothing you can do to stop her because that is a “right” inherent in this type of ownership. Of course, you have that right as well.

If anything happens to your friend, her share will pass to her designated heirs (or go through probate). It will not pass to you, unless you’re a designated beneficiary. You may or may not have the opportunity to purchase her share.

Note that there is no maximum to the number of people who can own property as tenants in common, although it can obviously become cumbersome to have too many people involved.

Benefits

As mentioned above, one benefit to tenants in common is that you can sell your share without the other party’s approval or consent. You can also sell your share, even if the other portion is held up in probate or some other dispute.

Another benefit is that if one of the owners has a mortgage on their share, the mortgage is only secured by that share, not by the entire property. Institutional lenders are not typically eager to enter into this kind of arrangement, but it’s possible.

A third benefit is that you do not have to agree on how the asset will be passed on in the event of one party’s death. It will simply pass to whomever that particular party has designated. This makes tenants in common a sensible approach for unrelated parties.

And finally, even if you only own a small percentage of the property, you can enjoy the use of the entire property.

Get It in Writing

It’s important to know that matters related to real estate have to be in writing, so if you and your friend decide to purchase a property as tenants in common, an oral agreement will not suffice. You can access our Tenants in Common Agreement, customize it for your state and personal situation, and download and print it right now. Even if you’re not ready to pull the trigger, you can print it out and use it as a guide as you consider your options. There are other ways to title property as well, so make sure you are familiar with the pros and cons of each type of ownership.

Get started Start Your Tenants in Common Agreement Answer a few questions. We'll take care of the rest.

Get started Start Your Tenants in Common Agreement Answer a few questions. We'll take care of the rest.