Tenants in Common Agreement

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A tenants in common (TIC) agreement is a contract where two or more people set out their legal ownership rights, obligations, and terms of property management. This agreement can outline what percentage of legal partition each tenant owns or who will inherit the tenant’s shares upon his or her death. Download this printable TIC sample from Lawrina and edit the form to your desired terms.
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Instead of a singlehanded property purchase, people sometimes prefer options that allow them to share property costs and responsibilities. While some may do this for financial reasons, others may use this method as an investment vehicle. Either way, prospective co-owners may enter a tenants in common agreement with other interested purchasers to get the best value for money.

Anyone considering tenancy in common requires a legal agreement to protect the rights and interests of all involved parties. Whether the other party is a friend, family member, or spouse, prospective tenants in common should enter an agreement that specifies the tenancy relationship and defines each person’s rights, responsibilities, and obligations.

What Is a Tenants in Common Agreement (TIC)?

A tenants in common agreement (TIC agreement) is a legal contract involving at least two people who decide to share ownership rights to real estate property or land. The tenants in common agreement describes their tenancy relationship, establishing each person’s general rights and individual responsibilities. Specifics include each party’s percentage of ownership, tax responsibilities, and management obligations. 

With co-tenancy agreements, partnerships between prospective tenants are accessible regardless of prior relationship. This type of agreement also ensures that the likelihood of a dispute is reduced while the contract is active.

Parties of the Tenants in Common Agreement

Tenancy-in-common requires a written contract agreed to by all owners. Any interested parties can enter a tenants in common agreement. Since the contract contains specific details of the tenancy and each party’s obligations, no prior relationship is required between co-tenants. Interested parties must only agree to be co-tenants and purchase the property together. The following parties can use a simple tenants in common agreement template to share rights and responsibilities in real estate property or land:

  • Family members –– When one family member wants to help out another family member, they may decide to purchase and own property together. Ownership can be unequally divided, which means that the property passes to the deceased's estate, not automatically to the surviving owner upon the death of one owner.
  • Friends –– When friends hold a real estate title as tenants in common, they tend to each have the same interest in it. The interest can be equally or unequally split if you purchase a property with two friends, for example. This could mean that each of your two friends owns 25% of the property, while you own the remaining 50%.
  • Unmarried couple –– When one person in a couple earns a higher income than the other, they may decide to own property together before getting married. Ownership can be unequally divided between the partners, so that if one of them dies, the deceased's share of the property goes to their estate, not to the surviving partner.

Key Terms

  • Tenants in common –– Two or more parties sharing ownership interests and a general agreement template in a real estate property.
  • Recitals –– The property description, including the type, location, purpose.
  • Proportionate share –– The percentage of a tenant’s ownership of the commonly held property.
  • Transfer restrictions –– The limitations on sharing the undivided interest of a tenant by transferring it to any third parties.
Insight

The term “conveyance” refers to transferring property from one party to another. The term is commonly used in transactions with real estate, when parties transfer ownership to real property, such as land, building, etc. 

How Tenancy in Common Works

There are multiple examples of tenants in common. Any interested parties can create a tenants in common agreement at any time and for any property. Co-tenants can decide to create a template of mutual agreement and then purchase property together or accommodate another tenant. These co-tenants may be unrelated.

Parties to a tenancy in common agreement do not own individual or separate parts of a property. Instead, each person owns rights to the property and is also responsible for their percentage. Before implementing modifications, all co-tenants must agree on any changes, especially structural adjustments.

Tenants in common must abide by the contract whether or not they live on the property. If one tenant dies, the decedent’s interest in the property does not pass to the other co-tenants. Instead, these interests become the responsibility of the decedent’s estate or heir. Regardless of the death, all other co-tenants retain their interests until the tenants in common agreement is terminated.

An equal share of interests and percentages among co-tenants is not necessary. Co-tenants may decide to share their interests equally or have one or more parties control a larger percentage than the other. Each co-tenant’s responsibility typically matches their portion of the property. Also, parties can sell their share anytime without breaking the tenants in common agreement.

Insight

When a couple buys a property together, they can sign a TIC agreement, which primarily protects the interests of each owner. It can also be signed by family members or friends. People who wish to define their share of the property and pass it on to their heirs in the event of their death may find the tenants in common agreement beneficial.

Types of Tenancy in Common Arrangements

There are different types of tenancy in common arrangements allowed by law. Tenants in common may prefer one arrangement over the other if they want survivorship rights or if they would prefer that the contract be terminated where one person wants to sell their share or buy out the other.

Insight

Banks have even begun to offer loans for split ownership percentages when purchasing a property. Co-owners can take out individual mortgages on their shares, decreasing the risk for joint buyers and lowering the risk of foreclosure. There are separate rules and requirements for specific types of property, such as a holiday home or investment property compared to a family home.

The law may also restrict the type of arrangement available to prospective co-tenants. For instance, married or common-law spouses may prefer the Tenancy by Entirety arrangement over simple Tenancy in Common to avoid probate proceedings. Intending co-tenants may use this tenants in common agreement template to enter a contract after deciding which of the following agreements is preferred.

Tenancy in Common

Tenancy in common is the most common type of shared tenancy in the real estate market. Two or more tenants agree to share responsibilities and obligations on a property and maintain the specified relationship until the agreement no longer holds. Under this arrangement, the shared rights and responsibilities may not be equal. Tenants in common may split ownership 80–20, 60–40, or as otherwise agreed. Upon one partner’s death, the decedent’s percentage is transferred to their heir or estate, not the other co-tenant. A simple tenants in common agreement template by Lawrina can help get prospective co-tenants started.

Joint Tenancy

couple carrying the desk with boxes and a plant to the house

In a joint tenancy, you and your spouse or common-law partner own assets as if you were one person. As a result, both of you have equal rights over the asset, as well as equal obligations.

Tenancy by Entirety

The concept of tenancy by entirety (TBE) refers to married couples holding an equal interest in property and survivorship rights, which means their property is not subject to probate. It is not 50/50 ownership; each spouse owns 100% of the property.

How To Write a Tenancy in Common Agreement

Coordinate with all other parties

Tenants must be part of all decision-making proceedings from start to finish. Before drafting the memorandum of tenants in common agreement, each party must demonstrate a willingness to enter into a contract and abide by its specifications. 

Negotiate essential terms of the contract

Co-tenants must properly negotiate before signing a tenancy in common contract. After reaching a consensus, the parties must consider all possible events and include guidelines for these scenarios. For instance, each party must understand what happens if one person wants to sell, the rights available to co-tenants, and how to calculate responsibilities if the property appreciates or depreciates. A tenants in common agreement template should include the following provisions:

  1. Introduction
    An agreement can include a statement of the parties' signing locations and dates. There should also be a clear statement that they are "tenants in common" as opposed to any other form of ownership. The parties’ names, positions, and the nature of the agreement should be included.
  2. Recitals
    In this section, tenants can provide information about the property, such as the address, description, and use.
  3. Term
    A tenants in common agreement template should specify when the tenancy begins and ends.
  4. Payment
    Parties can specify how the initial payment will be made to purchase the property and how the property shares will be divided among the parties.
  5. Further Contributions
    If additional investment in the property is required, the parties can include information about how these contributions are to be made and how much each party will contribute. A TIC agreement can specify how each party will pay the mortgage or any other loan. The amount of each party's contribution is usually based on the amount they paid initially.
  6. Other Provisions
    The agreement can also include other clauses, including the governing law, representatives, indemnification clauses, and more.
  7. Signatures
    The parties should sign and date the document at the end of the agreement.

How To Terminate Your Tenancy in Common

If you wish to end your fixed-term joint tenancy, you must simply get the approval of your landlord and consent from the other tenants. When you end your tenancy, it ends for everyone, as mentioned in the printable transfer of ownership agreement template. It is necessary to get all tenants' consent to end a joint tenancy with a break clause unless your agreement states otherwise.

Property Taxes With Tenancy in Common

Regardless of how you decide to structure your ownership of the property, there will be tax implications. As joint tenants, you are equally liable for the property's taxes. 

Insight

Almost all jurisdictions require tenants in common to pay their property taxes as tenants in common. In most jurisdictions, each independent owner may be responsible for up to the full assessment amount. The tenants in common will receive a single property tax bill that will have to be sorted between them.

The implication is that co-tenants are jointly liable for the taxes, meaning that they are each liable for the full amount regardless of their ownership percentage. If this is the case, the co-tenant can deduct the amount they contributed. If this is not the position in the relevant tax jurisdiction, then the applicable state laws will apply. The tenants can pay and deduct taxes up to the amount of their percentage of ownership, if they so decide.

How To Use This Tenants in Common Agreement Template

TIC agreements outline the rights, obligations, and management terms of property owned by two or more people. A TIC agreement can help individuals purchase property at a lower price since many people choose to share real estate costs. Tenants may choose to make a tenant in common agreement example to specify what their legal ownership percentage each of them will have or who will inherit their share of ownership on their death. This tenancy in common agreement sample by Lawrina is a helpful tool to protect your property entitlements.

Common Use Cases

  • By signing this agreement, the joint tenancy is "severed," and the sale proceeds of the real estate property are divided among the owners.
  • Whether you are married or in an unmarried cohabiting relationship, you will likely want the reassurance that if you separate, you will each get back the money you invested in a property you purchased together.
  • Buying a house together is common for couples, friends, or family members to get on the property ladder and become homeowners.
  • Property management, which protects the individual interests of each owner, is not covered in this document.

When Not To Use a Tenancy in Common Agreement

Using a joint tenancy agreement is a smarter option when purchasing a home with a spouse or partner. This way, if one of you passes away, the other keeps the property. Other benefits of a joint tenancy include:

  • Probate fees can be avoided since the property is transferred to the surviving owner(s) under the right of survivorship.
  • Joint tenants are entitled to full use and possession of any properties they own.

State Law

Property law can have particular rules about the language required to deal with certain types of homeownership. Below are the state laws across the U.S. regulating tenancy-in-common and joint tenancy relations. 

State Law
Alabama

 Ala. Code § 35-4-7

State Law
Alaska

Alaska Stat. 34.15.110

State Law
Arizona

ARS § 33-431

State Law
Arkansas

Ark. Code § 18-13-113

State Law
California

Cal. Civil Code § 685

State Law
Colorado

Colo. Rev. Stat. § 38-31-101

State Law
Connecticut

Conn. Gen. Stat. § 47-14a

State Law
Delaware

Del. Code Ann. tit. 25, § 311

State Law
Florida

Fla. Rev. Stat. Title XL § 689.15

State Law
Georgia

GA Code § 44-6-120

State Law
Hawaii

Haw. Rev. Stat. § 509-2

State Law
Idaho

Idaho Code §§ 55-508

State Law
Illinois

765 ILCS 1005

State Law
Indiana

IC Title 32-17-3

State Law
Iowa

Iowa Code Ann. § 557.15

State Law
Kansas

K.S.A. 58-501

State Law
Kentucky

Ky. Rev. Stat. § 381.120

State Law
Louisiana

La. Stat. tit. 9 § 1711.1

State Law
Maine

Me. Rev. Stat. Ann. tit. 36 § 555

State Law
Maryland

Md. Code Ann § 4-108

State Law
Massachusetts

Mass. Gen. Laws Ann. ch. 184, § 7A

State Law
Michigan

Mich. Comp. Law § 700.2901

State Law
Minnesota

Minn. Stat. Ann. § 500.19

State Law
Mississippi

Miss. Code Ann. § 89-1-7

State Law
Missouri

Mo. Rev. Stat. §§ 442.025

State Law
Montana

Mont. Code Ann. § 70-20-105

State Law
Nebraska

Neb. Rev. Stat. § 76-118

State Law
Nevada

NV Admin Code 375.128

State Law
New Hampshire

NH Rev Stat § 477:18

State Law
New Jersey

NJ Rev Stat § 46:3-17

State Law
New Mexico

NM Stat § 47-1-36

State Law
New York

NY Est Pow & Trusts L §§ 6-2.1, 6-2.2

State Law
North Carolina

N.C. Gen. Stat. § 6-41-71

State Law
North Dakota

N.D. Cent. Code § 47-02-08

State Law
Ohio

Ohio Rev. Code Ann. § 5302.19

State Law
Oklahoma

60 OK Stat § 60-74

State Law
Oregon

ORS Volume 03, § 93.180

State Law
Pennsylvania

15 PA Cons Stat § 8422

State Law
Rhode Island

RI Gen L § 34-3-1

State Law
South Carolina

S.C. Code §27-7-40

State Law
South Dakota

S.D. Codified Laws Ann. § 29A-6-302

State Law
Tennessee

Tenn. Code Ann.Title 66, chapter 1, part 1, § 66-1-107; 
Title 61, part 2, § 66-1-202.

State Law
Texas

Tex. Est. Code §101.002

State Law
Utah

Utah Real Estate Code § 57-1-5

State Law
Vermont

Vermont Statutes, Title 9, chapter 134, § 4352 

State Law
Virginia

Va. Code Ann. § 55.1-135

State Law
Washington

RCW 64.28.020

State Law
West Virginia

WV Code § 36-1-19

State Law
Wisconsin

Wis. Stat. Ann. §§ 700.19; 700.20

State Law
Wyoming

WY Stat § 34-1-140

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Frequently Asked Questions

When a tenant in common dies, what happens to the tenant's interest in the estate?

When a Tenant in common dies, their ownership share is passed on to that tenant’s estate and handled according to the deceased tenant’s will. Any surviving tenants continue owning and occupying their share of the property. The heir is then placed in the position of the deceased tenant with the same rights and responsibilities. The surviving tenants still have the same ownership they had before and may continue the tenancy agreement with the heir.

What is the purpose of a tenancy in common agreement?

Tenancy in common is a legal arrangement in which two or more parties jointly hold the tile and own a share of the property, such as a building or piece of land. The key feature is that either party can sell their share of the property and reserve the right to pass on their share to their heirs. The share size of Tenants in common may vary between the co-tenants, and ownership can be transferred without interference.

Does a tenancy in common require city approval?

Parties do not require city approval to decide on tenancy via a simple tenants in common agreement template. However, state law may provide specific requirements. For instance, California co-tenants require approval from the California Department of Real Estate (DRE) if the property has at least five residential units.

What are the disadvantages of tenants in common?

One disadvantage with tenancy in common is that a co-tenant can handle their share however they wish, regardless of the other party’s preference. In addition, the tenants in common agreement template used for the contract may include creditors for one tenant, leaving the other tenant open to associated risks.

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