Tenants In Common
You can choose to own property with others as tenants in common (TIC). This means that each "owner" has the right to their interest (percentage) of the property, but to their interest only. For example, if you purchase a cabin with a business partner, and you put up 70 percent and he puts up 30 percent, you own 70 percent of the property. If anything happens to you, your 70 percent passes to your heirs, not to your partner or his heirs.
This arrangement is beneficial for unrelated parties, because you call the shots about who inherits your property. It may have to go through probate, but if you've left clear instructions about your wishes, it should not be a problem.
An additional benefit is that you can sell your share any time you want, without the consent or approval of your partner(s). You also have the right to mortgage, transfer, or assign your interest — and so do your partners.
Joint tenants (JT), or joint tenants with rights of survivorship (JTWROS), are the forms of ownership most commonly used by married couples. In general this means that both parties own 100% of the property and there is no divided interest as there is with TIC. The "rights of survivorship" clause means that the property passes directly to the other party outside of the will. This is an excellent benefit to ensure that the property does not go through probate. Unlike TIC, however, one tenant cannot sell their interest in the property, because they have an undivided 100% interest. Any sale has to have the consent of both parties. Joint tenancy is not restricted to married couples, but if you choose this form, make sure you know what it means.
Make It Official
As you contemplate purchasing property with your spouse, business partner, parents, or friends, it's critical that you know how you want to title it. If you decide to title the property as Joint Tenants or Joint Tenants with Rights of Survivorship, you do not need a separate agreement stating this decision. You can simply specify the terminology you want on the deed you receive from the seller.
But if you decide to purchase property as tenants in common, you should get it in writing because agreements related to real estate transactions are required to be in writing. Fortunately, you can simply use our Tenants in Common Agreement. Feel free to customize it for your individual situation, and then download and print it. Even if you're not ready to finalize your decision about ownership, our form can serve as an excellent guide so you understand exactly what is involved in a TIC agreement.
Whichever method of ownership you select, knowing the pros and cons of each will help you choose what's best for your situation.
This article contains general legal information and does not contain legal advice. Rocket Lawyer is not a law firm or a substitute for an attorney or law firm. The law is complex and changes often. For legal advice, please ask a lawyer.