Legal Definitions - Tenants in common

Tenants in common is a legal term describing a way for two or more people to own property together. In this arrangement, each owner, known as a "tenant in common," holds an undivided interest in the property. This means they own a specific percentage or share of the entire property, rather than a particular physical section of it.

Key characteristics of tenants in common include:

• Undivided Interests: Each owner has the right to possess and use the entire property, even if their ownership share is less than 100%.
• Potentially Unequal Shares: The owners do not have to hold equal shares; one owner might own 60% while another owns 40%, for example.
• No Right of Survivorship: This is a crucial distinction. If one tenant in common dies, their share of the property does not automatically pass to the other co-owners. Instead, it becomes part of their estate and is distributed according to their will or, if there is no will, by the laws of intestacy to their heirs.
• Independent Transferability: Each owner can sell, mortgage, or otherwise transfer their individual share of the property without the consent of the other co-owners.

Examples:

• Example 1: Family Vacation Home

  Imagine three siblings, Anna, Ben, and Clara, inherit their parents' lake house. Instead of selling it, they decide to keep it as a family vacation spot. Their parents' will specifies that Anna receives a 50% share, while Ben and Clara each receive a 25% share. They own the property as tenants in common. This means Anna owns half of the entire house, and Ben and Clara each own a quarter of the entire house, but none of them owns a specific bedroom or section exclusively. If Ben were to pass away, his 25% share would go to his children, as specified in his will, rather than automatically being divided between Anna and Clara.

• Example 2: Business Partners and Commercial Property

  Liam and Maya are business partners who decide to purchase a building to house their new consulting firm. Liam contributes 70% of the down payment and Maya contributes 30%. They choose to hold the property as tenants in common, reflecting their unequal financial contributions. This arrangement ensures that if Liam were to retire and sell his share, he could do so independently. More importantly, if either Liam or Maya were to die, their respective share of the property would pass to their own family or estate, rather than automatically transferring to the surviving business partner, providing financial security for their heirs.

• Example 3: Investment Group for Rental Property

  A group of four friends—David, Emily, Frank, and Grace—decide to pool their money to buy a duplex as an investment property to rent out. David contributes 40% of the purchase price, Emily 30%, Frank 20%, and Grace 10%. They title the property as tenants in common to accurately reflect their varying investment percentages. Each friend has an undivided interest in the entire duplex and a right to a share of the rental income proportional to their ownership. If Frank later decides he wants to sell his 20% share, he can do so to a new investor without needing permission from David, Emily, or Grace. Furthermore, if Grace passes away, her 10% share would be inherited by her designated beneficiaries, not automatically absorbed by the other three friends.