Tenancy-in-common is an American twist on the old British common law system of joint tenancy. Back in the day, in Britain, property that was co-owned had to be sold entirely or not at all. Naturally, this resulted in a lot of disagreement amongst co-owners, with the ultimate effect that such property changed hands very infrequently, which suited the aristocrats just fine. The fledgling American legal system was essentially a stripped-down version of British common law, and there was simply no room for impractical processes like joint tenancy. America developed the tenant in common system, which fostered the easy transfer of land, as part of a general distrust of aristocratic institutions.
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A tenant in common is a person who has a particular kind of partial ownership in a property. Title can be held by tenancy in common between two or more people. This kind of ownership is distinct from joint ownership, which is how most married couples hold their property. Ownership by tenancy in common can be started either by a seller, who sells discrete portions of a property interest, or by the buyer, who assembles a group of investors to buy separate stakes. Tenancy in common must be recorded on the title of the property.
One of the primary uses of tenancy in common is to hold an ownership interest in income generating property. The tenancy in common structure makes it relatively easy for an investor to resell their stake without assuming many of the risks of co-owners that would be associated with joint ownership, such as default. The separability of each ownership interest makes it easier for an investor to own a piece of a larger property they couldn't afford on their own, while receiving more rights to the property than other types of co-ownership.
The major feature of tenancy in common is that there is no right of survivorship by the other tenants in common. An ownership interest by tenancy in common can be transferred by will or intestacy to an heir. Each tenant in common has the right of full access to the common property, regardless of their relative ownership stake. Each is entitled to a share of the property's income in proportion to their ownership interest.
Financing and reselling are important issues in tenancy in common. Because each interest held under tenancy in common is discrete, it is not uncommon for each buyer/tenant to receive their own financing, even in a wraparound mortgage situation where the seller uses the payments of the tenants to remain current of a pre-existing mortgage. When reselling, a tenant in common could have difficulty finding a buyer if the property is does not produce passive income, or is not designed so that different tenants can use the property without interfering with each other.
Tenancy in common is frequently how ownership in condominium property exists. Each tenant is a co-owner, with full rights of use or access, and each is responsible for their share of the property's costs and taxes. But, the default of one tenant, or the sale of their interest, does not directly affect the ownership of the other tenants. Similarly, the death of a tenant does not result in the interest of the deceased tenant being conveyed to the other owners.
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