Of all the versatile structures when it comes to co-ownership of a property, the most commonly used is the tenants in common (TIC). In this structure individuals assume ownership on equal grounds; there may be a number of people who own an undivided interest in the property under consideration and each one of them has his or her own legal obligations as well as legal privileges.
If you are a person who is likely to buy property under this arrangement, then you need to be fully aware of all the laws and loopholes regarding the same. This helps in making sure that everyone is informed in the arrangement and their rights protected.
Understanding a Tenant in Common Agreement
In case there are several people who own a property, and everyone of them has separate, exclusive and undivided interest in the property, the relationship is described as a tenancy in common.
Unlike the joint tenant where the rights, the ownership and the interest of the shared property are same and will also be transferred to the other surviving co-owner, the tenant in common can own the property in different proportion and can pass on the share to the heirs upon their demise.
Legal Frameworks & Considerations of Tenant In Common Agreement
The implication here is that one should have adequate information about how the TIC agreement operates and the laws surrounding this process.
1. Entering into a Tenant in Common Agreement
While a TIC agreement does not have to be reduced and signed to legal papers in all the states in the country, it is advisable that one prepares a written document. This documents should include the ownership, who is supposed to maintain the business and where or with whom the expenses are going to be split?
You should engage the services of a Real estate lawyer for tenant in common agreement and acquiring getting agreement drafted. In this way, you will be able to ensure that all points of the agreement will include the management of specific issues regarding co-ownership and the fulfillment of legal requirements of co-ownership.
2. Ownership Responsibilities & Rights
Freehold title of the property is bestowed to all co-owners in the agreement and they can equally have the right to all parts of the property but, as to how the repairs and maintenance are to be accomplished must be clearly stated so as to avoid confusion on this.Â
Any changes concerning the property or even selling of the property need the consent of all the other joint owners. In this respect, it is also essential that the specific details in the written TIC agreement are equally written well so that decision-making does not become an issue or a cause of conflict.
3. Transfer of Property and Share Sale
The property owner has the right to alienate the share in the property regardless of other co-owners’ opinions. However, some TIC agreements includes provisions that give a co-owner the option to purchase the shares of other co-owners when the later decides to sell the property to a third party.
This is because a new co-owner can bring about changes of ownership to others in the property for example where a new partner is incorporated into the partnership property he or she can influence the ownership of that property to the other partners. The TIC agreement should state how something like this should be handled and what would be possible responsibilities of the new co-owner.
4. Settlement of Disputes & Conflicts
The need for arbitration or mediation to be put in place should also be stated in the tenants in common agreement. This is good in preventing the occurrence of prolonged and costly court cases from taking place.
Also, the agreement should identify procedures on how each party will deal with issues regarding the sale or partition of the property. It is important to provide for the possibilities of one co-owned to acquire the other or other procedures for the co-owner’s removal.
5. Estate Planning Considerations
Unlike joint tenancy there is no right of survivorship means that co-owners have to think about what will happen to this share of property when they die. In order to achieve this it is necessary to use such estate planning instruments as trusts or wills to ensure the share of the property will be transferred in accordance with the owner’s desire.
Furthermore, there will be taxation measures such as capital gains and estate duty in the transfer of property shares. In this regard, it is advisable for co-owners to seek professional advice from tax consultants in matters concerning taxation.
Conclusion
The legal arrangement of a tenant in common also provides the parties concerned a good deal of flexibility where property co-ownership is concerned. The owners can own a property simultaneously, in proportion, and by conveyancing separable rights.
It is advisable to consult a professional real estate attorney who will help prepare a clear tenants in common agreement to protect the rights of each co-owner and the agreement must contain efficient means of resolving the dispute.
