There are many ways to own a residential or commercial property, and occupancy in typical is one of them. While it is an option, there are a couple of factors why this kind of arrangement may not be the best way to protect realty.

In this post, we'll specify occupancy in common to provide you a mutual understanding of what it is and help you understand the involved threats so that you are much better equipped to choose whether it is the right option for you.

What Is Tenancy in Common?

There are numerous ways to own a residential or business residential or commercial property, and tenancy in typical (TIC) is one of them. Tenancy in Entirety and Joint Tenancy are two other types of real residential or commercial property ownership.

Tenants in common accept each hold an ownership percentage of the whole residential or commercial property, either an equivalent or different portion, and if among the joint tenants dies, their beneficiary will have the right to claim ownership of the residential or commercial property for the part that their predecessor held instead of the joint occupant.

Furthermore, different times may be used to acquire an ownership interest in tenants in common. Consequently, tenants might be eligible to purchase an interest after a number of years and at numerous times. Additionally, private conveyances might be used to transfer ownership interests to each occupant in typical.

How It Works

Owners who are likewise tenants in typical have rights and equal or unequal concentrated interest in every part of the residential or commercial property gotten with the same deed. However, each of the renters may own a various percentage of financial interest in the structure or piece of land.

Moreover, any tenant might independently offer or obtain versus their respective ownership interest. With regard to residential or commercial property tax and other residential or commercial property payments, all renters in typical will receive one expense. A well-drafted occupancy in typical contract will define the liability of each occupant with regard to residential or commercial property taxes.

Why Tenancy in Common Can Be Beneficial

A structure or piece of land may be owned jointly by two or more parties under this sort of legal plan.

The main characteristic of a tenancy in typical is that each company partner maintains the alternative to leave their particular shares of the residential or commercial property to their descendants while also being able to offer their particular portions of the residential or commercial property.

Although there make sure benefits, the joint tenancy of this kind likewise presents a number of risks. We'll check out these threats in the next area.

The Problems with This Kind of Joint Tenancy

It is very important to comprehend the risks included before participating in this kind of co-ownership arrangement. Let's look at some of the issues or disadvantages related to occupancy in common.

Joint and Several Liability

Each renter in typical is an asset of each co-owner and is responsible for the financial obligations of all other owners. Our company believe that taking that kind of risk would be unreasonable for a financial investment. You should likewise fret about the other co-owners' lenders in addition to your own.

Every Co-owner Has the Same Ownership Rights

The biggest issue with tenants in common is that they have complete flexibility over how they use their fractional ownership interest in the residential or commercial property. One of the joint owners might borrow cash versus their share of the residential or commercial property. The interest held by one owner is also subject to the lenders of that owner.

No Direct Right of Survivorship

If there is no will in location clearly mentioning the transfer of ownership to an heir, member of the family can not declare the right to the part the deceased renter in common owned.

Tenants in Common Are Free to Resell Their Portion

Existing tenants in typical might learn that they now share ownership of the residential or commercial property with a new co-owner who may not fully understand the inspiration for the financial investment and how it works. The new renter could require today co-owners of a residential or commercial property to sell it by submitting a partition action lawsuit.

How Can You Mitigate These Risks?

If you choose by doing this of owning residential or commercial property, the bright side is that there are ways you can avoid these issues.

Do Your Research About Every Co-owner Before Participating In an Agreement

Joint occupancy can pose numerous threats, so it is necessary to find out as much as you can about individuals you're participating in an agreement with. If you know that a joint occupant has a betting problem or a bad credit rating, for example, you should hesitate about the joint tenancy arrangement.

Use a Well-drafted Agreement

The renters can prevent various drawbacks in common by signing a well-drafted written agreement. This is why it's important to have a tenants-in-common agreement developed by a genuine estate attorney.

A stipulation in the arrangement might grant the co-owners the legal right to decline on the occasion that one of them decides to offer. The authority of the co-owners to approve or turn down prospective buyers might likewise be covered under the arrangement to secure existing tenants.

Make Sure You Have a Will in Place

Another way to make sure that your successor receives ownership of your portion of joint occupancy is to make sure that you have a well-written will in place that can not be easily contested. We suggest getting sound legal advice to guarantee that you are doing the very best you can to secure your properties in the event of your death.

Get Sound Legal Advice

It's also important to look for dependable legal counsel from a knowledgeable attorney that deals with realty deals. He or she can assist you identify any potential problems and use options to help alleviate dangers.

The Bottom Line

Although tenancy in common may look like a favorable alternative for owning property, there are several drawbacks that you require to be familiar with. Joint liability, the lack of right of survivorship, and more might make this sort of plan dangerous.

Fortunately, there are actions you can take to prevent or reduce the risks included. We advise seeking legal counsel before choosing whether occupancy in typical is the right way to go.

If you require assistance managing your residential or commercial property, you can turn to DoorLoop. With ingenious features to aid with your accounting, rent collections, and arrangement production, you can make the many of your tenancy in typical plan.

Wish to find out more? Learn more about the laws in play in your state and download the complimentary types you need for your rental company.

Frequently Asked Questions

David Bitton brings over twenty years of experience as an investor and co-founder at DoorLoop. A previous Forbes Technology Council member, legal CLE & TEDx speaker, he's a best-selling author and thought leader with discusses in Fortune, Insider, Forbes, HubSpot, and Nasdaq. A dedicated family male, he takes pleasure in life in South Florida with his spouse and three kids.

The info on this site is from public sources, for educational functions just and not meant for legal or accounting advice. DoorLoop does not guarantee its precision and is not responsible for any damages or inaccuracies.