Tenancy in common (TIC) is a kind of co-ownership of real property. This kind of concurrent ownership can be input into through deed in the time of purchase, will upon a person’s death, or in some cases, operation of law, based upon the state; TICs have a minimum of two tenants, and the Internal Revenue Service’s Revenue Procedure 2002-22 stipulates a maximum of 35 owner/co-tenants. TICs differ in that they do not possess rights of survivorship one of the renters; all rights of the tenant’s percentage of ownership transfer via will or operation of law into the designated heir, not the other renters.

Property Rights

All of co-tenants at a TIC have equal rights to the property, regardless of share percentage. Via a”tenant in common agreement,” a single co-tenant can be designated to reside on the house or all the co-tenants can share the property. None of the co-tenants at a TIC have the right to exclude some of the other co-tenants; if this is completed, monetary compensation may be due to the excluded co-tenant by law. Some TICs can designate use rights to owners (e.g., timeshares) and many others designate none with every co-tenant free to use at will.

Income Distribution

If a TIC creates income, the income is divided among co-tenants dependent on the percentage of ownership. Unlike joint ownership where everything is divided equally, TIC co-tenants can have uneven stocks in a TIC. When owner A owns 25 percent of the TIC, then 25 percent of the income generated by the TIC will be distributed to owner A. Additionally, owner A will be responsible for 25 percent of their mortgage, property tax, repairs, and some other expenses associated with maintenance of the TIC property.

Ownership Transfers

If a single owner at a joint property where every owner owns 50 percent decides to market his half without the agreement of the other half, the joint ownership automatically transports into a TIC. In the event where the lender takes back one proprietor half, the ownership also becomes a TIC. In cases where there are many owners in a concerted (equivalent ) property, and a single owner sells or transfers his stocks –the original two joint owners retain the joint ownership but input a TIC using the brand new co-tenant.

Survivorship

What distinguished TICs from some other kinds of ownership is that a single co-tenant’s stocks aren’t distributed to some other co-tenant, as it might in tenancy in entirety (a joint ownership accessible exclusively to husband and wife). Any stocks possessed by a co-tenant operate separately from the other co-tenants’ stocks; the stocks of the deceased will go to the heirs of the deceased, or probate to ascertain next-of-kin entitled to the co-tenant’s shares.

Tax Laws

TICs offer some tax benefits not available to other types of ownerships. Co-tenants access further tax benefits with a new depreciation schedule, permitting them to shelter a number of the money flow, should there be some. TIC co-tenants can also defer any capital gains tax by shifting dollar for dollar amid like-kind possessions, per Internal Revenue Code 1031.

See related