The legal term “tenants in common” refers to a form of ownership in which two or more people own separate shares of the same real property. In tenants in common circumstances, each person holds an individual, undivided ownership interest, which gives them an equal right to use the property or transfer their ownership interest. Any of these actions must be done through tenants in common agreement, rather than a deed other type of real property conveyance. To explore this concept, consider the following tenants in common definition.
Definition of Tenants in Common
- Two or more holders of real property who each own an undivided share with no right of survivorship.
1760-70 British common law
What is Tenancy in Common
Tenancy in common is a form of ownership of real property in which each co-owner owns a separate, distinct share of the property as a whole. This means that rather than owning a physically separate share of the property, such as a certain building or number of apartments, for example, each tenant in common owns a percentage of the value of the entire property. A tenancy in common is created through the use of a contract called a “tenancy in common agreement,” the property deed only showing each tenant in common’s ownership percentage.
Ownership interests in a tenancy in common may be bought and sold like any other investment opportunity. Because of this, individual tenants in common do not necessarily take ownership of their interest at the same time. For example, Fred may obtain his interest in the property several years after John.
Jessica and Marie purchase a house together for a purchase price of $200,000. Jessica pays $150,000 and Marie pays $50,000. The women create a tenants in common agreement in which Jessica owns a 75 percent share, and Marie owns a 25 percent share of the property. Although Jessica paid more for, and owns a larger share of, the property, the women have an equal right to use and enjoy the entire home.
Tenants in Common vs. Joint Tenants
Tenants in common and joint tenants are similar concepts, as the co-owners of the property own separate interests in the property as a whole, rather than being able to claim a specific part of the property. The first difference is that tenants in common may own shares of different sizes, and may obtain their shares at different times. Joint tenants must obtain the property together, on the same deed, and must own equal shares.
The other important difference in the two types of ownership lies in what happens when one of the co-owners dies. Joint tenants may own their share with “right of survivorship,” which means that, if one owner dies, his share automatically transfers to the remaining owners.
Jane, Bob, Adam, and Ronald own equal 25 percent shares in a rental property as joint tenants with right of survivorship. When Bob dies, the others divide his share, becoming 33 percent owners.
Tenants in common have no right of survivorship. While a co-owner may specify in his will or other estate planning documents that his share is to be divided among the surviving owners in the event of his death, it is not automatic. Without such a document, the deceased owner’s interest becomes part of his estate, to be distributed to his heirs or named beneficiaries.
Tenants in Common vs. Tenants by Entirety
In direct opposition to the fractional ownership of tenants in common, tenants by entirety specifies that spouses own a property together, as a single entity. One advantage of a tenancy by entirety is that creditors attempting to collect a debt owed by one spouse cannot place a lien on, or sell the property to satisfy the debt. The property can only be attached or sold by creditors of the couple.
Nathan and Suzy own their home as tenants by entirety. Nathan has a delinquent debt from an automobile loan he incurred before the couple was married. The finance company cannot place a lien on, or force the sale of, the couple’s home, as Suzy has no obligation to repay Nathan’s debt.
A tenancy by entirety can only be created by a married couple, and married couples purchasing property are assumed to hold that property as tenants by entirety, unless specifically stated otherwise in the deed. A tenant by entirety cannot transfer or sell his interest in the property without the express written consent of the other tenant, and if one tenant dies, his interest passes to the surviving spouse, not to other heirs or beneficiaries of the decedent. This is because a tenancy in common is subject to right of survivorship.
Suzy has three children of a previous marriage, whom she has provided for in her will. When Suzy passes away, ownership of the couple’s home automatically transfers to Nathan as sole owner. Even if Suzy stated in her will that she wanted her share of the home to be given to her youngest child, the home remains the sole property of Nathan, as a tenancy by entirety automatically has right of survivorship.
Rights and Duties of Tenants
Tenants in common have a right to unrestricted access to the entire property, regardless of the percentage each owns. If the property earns income, each co-owner has a right to a percentage of the income equal to their percentage of ownership. Each co-owner in a tenancy in common also has a responsibility of maintenance, upkeep, taxes, and other costs of owning the property equal to their percentage of ownership.
Jane owns a 50 percent share of a tenancy in common, with Bob owning a 25 percent share, and Adam and Ronald owning 12.5 percent each. Each one of them is responsible for paying their percent share towards upkeep and ownership of the property, and each is entitled to their percent share of the property’s income.
There is one exception, in that no tenant in common can be forced to pay for improvements to the property, unless such a provision is included in the tenancy in common agreement. If one co-owner desires to improve the property, he would have to pay for it himself, unless other co-owners willingly contribute.
Right of Survivorship
Tenants in common have no true right of survivorship. In simple terms, this means that, if one of the co-owners dies, his interest in the property passes to his heir or beneficiaries, as stated in a will or trust, or according to his state’s probate laws. In circumstances in which a right of survivorship exists, a deceased co-owner’s interest passes to the surviving co-owners in equal parts.
John and Bill own a home as joint tenants with right of survivorship. When John dies, Bill becomes the sole owner, regardless of what John may have stated in his will.
Partition of the Property
In the event a co-owner of a property held in joint tenancy with right of survivorship wishes to dissolve the joint tenancy, he may file a petition to partition with the court. This may be done if the co-owner wants to leave his share of the property to someone other than the other co-owner(s). If the court grants the petition to partition the property, the property may be split into separate parcels, each co-owner receiving a part of equal value. Alternatively, the property may be sold, an equal portion of the proceeds to go to each co-owner.
Sale of the property may be ordered instead of splitting if local zoning laws do not allow for parceling out the property, or if doing so will significantly decrease the value of the property. If the property is partitioned by splitting it into separate parcels, new deeds will be issued for each parcel.
Amelia and Matthew own a large property containing rental apartment units, as joint tenants with right of survivorship. The couple divorces, and Amelia does not want to be tied to management of the property with her ex-husband. Nor does she not want her half of the property to go to him in the event of her death.
Amelia files a petition to partition with the court. Because splitting the large apartment complex is not feasible, the judge orders the property sold, with each party receiving 50 percent of the profit. In this case, either party has the option to buy the other party out, becoming sole owner of the undivided property.
Related Legal Terms and Issues
- Beneficiary – A person named in a will or trust as the intended recipient of assets or property.
- Decedent – A person who has died.
- Deed – A written instrument that conveys title to real property from one individual to another.
- Heir – An individual who has a right to inherit property and assets of another individual.
- Jurisdiction – The legal authority to hear legal cases and make judgments; the geographical region of authority to enforce justice.
- Partition – The act of dividing something into parts.
- Real Property – Land and property attached or fixed directly to the land, including buildings and structures.