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What is a Tenant in Common?

Tenancy in common, also called as TIC, allows two or more people to have ownership in a property, wherein each owner has the right to leave his share of the property to any beneficiary upon the owner’s death or in other words it is a form of real estate title wherein more than one person possesses a share of the property and those who owns portions of the property are called tenants in common. However, tenancy in common should not be confused or mixed with joint tenancy because unlike joint tenancy, common tenancy does not signifies a right of survivorship, wherein the title of the property is passed to the surviving owner, however in common tenancy, the title of the estate can be passed to a beneficiary of the owner’s choosing. Tenancy in common It is not necessary that if you are tenants in common, you will have equal share in the estate or the property. Each proprietor can have equal or unequal shares in a property, like for instance, if there are 3 tenants in a property: Tenant A, Tenant B and Tenant C. It is fairly possible that both the tenants A and B own 25% of the property each whereas tenant C has 50% ownership. But in most of the cases, it is equal ownership of the estate or the property amongst the tenants.

Tenant in Common

Tenancy in common is most common form of concurrent ownership wherein each tenant owns undivided share of entire property and thus each tenant has equal right to possess, share rents and share appreciated value. The interest which tenants get or is entitled to is transferrable and inheritable. This type of ownership is most common where the co-owners are not married or have contributed and since the tenants own a certain percentage of the undivided property, their deeds can show only their ownership percentages and right of a particular TIC owner to use a particular dwelling comes from a written contract signed by all co-owners, also called as Tenancy in Common Agreement.

What is Tenants in Common Agreement?

In most of the jurisdictions, a tenancy-in-common agreement imposes joint and several liabilities on tenants, however it is ideal for a situation or for people who wish to own property jointly with their partners but wish to leave their share to their choice of person rather than the co-tenant. A tenant in common agreement can help you layout and document the important details about who own what and how to utilize the same. It also allows for multiple people to share interest in real property while retaining a lot of the freedoms that can be restricted in a joint tenancy. In legal terminology, it is also called as declaration of trust which records each person’s contribution and therefore the proportions of the property they own, along with their individual contributions towards mortgage payments and maintenance.

Apart from them, this agreement is suitable for those who have children because the agreement will guarantee that their children will get benefit from their share of the estate once they die. However, in this case, they need to mention the same in their will as well. Once the agreement is made, it is advisable to register it with Land Registry, however it is not a mandatory step. You can show evidence of your ownership of the property by filling the Form TR1 (during a house purchase) or Form JO (to be used in the absence of a transfer, asset or lease) and send the respective form to the Land Registry. There is no restriction of number of parties who can enter the agreement and in case of a conflict, it can be terminated by giving four months prior notice to each tenant.

Also Read : Deposit Protection Schemes and Landlords For Tenants

You can use the tenants in common agreement in case:

  1. You have purchased your property with other people.
  2. You, along with others, have inherited or were gifted property.

Tenants in common agreement enables homeowners the following:

  1. To have a legal document which confirms the actual proportions in which owners own their homes.
  2. To confirm the actual amounts originally spent by each party in terms of a percentage amount
  3. To confirm the proportions to be repaid to each homeowner when the property is sold.
  4. To specify the parties contributions for the payment of the mortgage and maintenance obligations, and
  5. To prevent any conflict such as who gave what at the beginning and who should get what when a property comes to be sold.

What is the Difference Between Joint Tenants and Tenants in Common?

When two or more people buy a property together, there are two ways the property can be held i.e. either as Joint Tenants or Tenants in Common. Each of them has their own share of advantage and disadvantages. While joint tenancy is a type of concurrent estate in which co-owners have a right of survivorship, tenants in common do not enjoy this facility.

Joint Tenants vs Tenants in Common

The parameters on which they both are different from each other is listed as below:

  1. Ownership Interest: Tenants in common may have different ownership interests, wherein for instance, Tenant A and Tenant B may each own 25 percent of the home, while Tenant C own 50 percent of the property as a whole whereas in joint tenancy, each tenants must obtain equal shares of the property with the same deed at the same time.
  2. Withdrawal from the ownership: A joint tenancy is broken if one of the tenants sells his or her interest to another person, which will change the entire ownership arrangement equally for all the tenants whereas a tenancy in common may come to an end if one or more co-tenants buys out the others.
  3. Right of survivorship: One of the most important differences between the two types of shared ownership is what happens to the property when one of the ownership dies. In case of joint tenancy, the interest and share of a deceased owner automatically gets transferred to the remaining surviving owners, whereas this is not the case with tenants in common i.e. unless it is specified in the deceased’s will, it will not pass on to the surviving tenants.

What are Pros and Cons of Tenancy in Common?

Like every other thing in life, tenancy in common also has its own share of advantages and disadvantages, such as:

Advantages of Tenants in Common:

In case you have children from your previous relationship, it gives them the opportunity to inherit your share while your current spouse or partner continues to live there for his or her lifetime.

Also, it could be considered as a way to ensure that if you die and your partner or spouse subsequently needs to go into residential care, at least half of the property can be protected from being taken by the local authority to fund care fees.

It also allows the unmarried couples and to those who are in a civil partnership to use a discretionary trust and thus reduce Inheritance Tax, which in any other case is payable.

Being a tenant in common gives you the right to encumber the property i.e. a tenant in common can pledge his ownership interest in the property as collateral for a loan, which doesn’t demand consent of your co-owners.

In case there is a situation which demands partitioning of the property, both creditors and tenants can go to court and ask for the same.

It gives each tenant to deed his portion of the property, or mortgage it without seeking consent of other co-tenants. However, this very same point could be a disadvantage for someone who is seeking stability.

However, tenancy in common is not as simple as it sounds or appears to be. For some, it appears to be a very complex arrangement and they would like to opt for joint tenancy where they have right of survivorship and this is one of its major disadvantage. It proves to be a disadvantage where the first partner needs to go into care, and then second partner living there may get stuck in a position that even if he wants to move out, the local authority would take the possession of the property. Another instance where it could be a disadvantage is where one partner has filed a partition action forcing other co-tenants to sell the property. The equal use of unequal interest in a property could be advantageous to some, while it could be a troublesome proposition for others.

In order to have maximum advantage of being a tenant in common, one needs to have a clear estate planning with detailed insight of inheritance tax benefits.

Frequently Asked Questions:

Q1: Do property interests have to be equal between tenants in common?

Ans1: No, it is not mandatory to have common share amongst co-tenants. For instance, Tenant A and B may own 25% each, whereas Tenant C has access to other 50% of the property.

Q2: Can tenants in common transfer their property interests to other parties?

Ans2: Yes they can do so, provided they have mentioned the same in their will. In any other case, the deceased share will pass to your nearest living blood relatives as per Rules of Intestacy.

Q3: Is it possible to terminate tenancy in common? If yes, how is it done?

Ans3: Yes, it is possible to terminate tenancy in common and it can be done in a few different ways, such as a) by having an agreement between all the tenants in common. b) by a judge ordered partition or c) by an ouster, which means any act which unlawfully deprives a tenant in common of their share of the property

Q4: Whom to contact in case of any conflict amongst tenants in common?

Ans4: In there is a dispute amongst tenants in common, you may visit or contact a property lawyer who can help you in drafting a tenancy in common agreement and can also represent your case in the court.

Q5: What is tenant in common agreement?

Ans5: Tenant in common agreement, also known as declaration of trust, is guided by applicable law which outlines the implications of shared ownership on a property tax, which is applicable to tenants ownership interest in the property, irrespective of the amount paid by them.

Q6: How many parties can enter into the tenant in common agreement?

Ans6: There is no restriction on the number of parties which can enter the agreement.

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