Tenant in Common is a label seen most often on real estate titles. But what does it mean? Simply put, it refers to an asset owned by two or more people in undivided interest. An undivided interest means that although two people own the property, both have complete rights to use the property. The shares in a tenant in common arrangement may be equal or unequal. One owner may own 40% of the property, another 30%, and a third owner 20%. Despite the different shares, each owner can use the property freely – the 20% owner is not restricted to using a smaller slice of the property.
Tenant in Common arrangements are best understood in contrast to their popular counterpart, a Joint Tenancy. Joint Tenancy arrangements also involve undivided interests in land but the shares must split equally between the owners 50/50. Joint Tenancies also have special survivorship rights that come into play when one owner dies. Survivorship rights refer to the automatic transfer of the property to the other owners at death. In a Joint Tenancy, the co-owner receives the remaining 50% of the property when the other owner dies. Married couples often hold property as joint tenants. Survivorship rights are an important consideration in estate planning because unlike tenants in common arrangements which go through probate, properties held in Joint Tenancy avoid probate altogether.
The consent of each owner is the essential element in titling correctly. Once the owners agree, the term “tenant in common” or “joint tenancy” is added to the title to clarify ownership rights.
Alternatives exist to these popular options for property ownership. For assistance in deciding what arrangement is right for your situation, feel free to contact us at (626) 696-3145.
