What is the Definition of "Tenants in Common" in Real Estate?
When you purchase real estate with one or more individuals, you must decide the type of ownership under which you want the property held. For multiple owners there are three types of ownership--joint tenancy, tenancy by the entirety and tenancy in common. The type of ownership you choose determines your ability to transfer your ownership, your share of the ownership and the rights of survivors.
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Function
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The type of ownership of a property effects your rights to sell or transfer your share of the property. It also affects what happens to your share if you should die. The three ownership types only refer to concurrent ownership of real property by multiple owners. Though tenants generally refer to those who are renting a property, in concurrent ownership terms it refers to the co-owners of real estate. Should you and your partner have a falling out, or your situations change, how your ownership is defined is crucial to your ability to buy one another out or for you to sell your share.
History
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Modern property laws evolved from the feudal system in England, when the king granted land to loyal lords who then granted parcels of that land to their loyal affiliates, such as knights or lesser lords. This system continued during American colonial days, but was abolished after the American Revolution. Now an owner owns the land in absolute independence of the state as the overlord, though the state still retains jurisdiction over the land and can therefore pass laws related to property.
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Features
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Tenants in common enjoy options unavailable to other types of property ownership such as joint tenancy. Tenants in common allows owners to have unequal shares in the property. For example, owner A can own one-half of the property with the other half shared, equally or unequally, between owners B and C. An owner can divest or transfer their share of the ownership by a deed, will or other conveyance, such as a trust.
Considerations
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When you purchase property with another person, consider what could happen in the future, prior to choosing the type of ownership you want. Married persons typically own property in tenancy by the entirety or joint tenancy. In this case the ownership interest upon death automatically reverts to the surviving spouse or children, unless a will or other legal document states otherwise. If the property you are purchasing is rental property, consider what would happen if your partner went into debt and couldn't live up to their responsibilities. With tenants in common, your share of the property, as a result of a debt collection action, would be unaffected, but that would not be the case in joint tenancy.
Benefits
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One benefit of tenants in common is that the ownership interest does not have to be established when the property is acquired. At any time, a co-tenant can be added or removed. Quit claim deeds are one way to add or remove a co-tenant. In tenants in common, the right to survivorship applies only to the share of the property that the deceased owner held. The heirs of a person who holds property as a tenant in common cannot inherit the entire property. This keeps the partner(s)' share safe, but also requires that the transfer of the deceased's estate to the heirs must be done in probate court.
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