Tenants in Common (TIC) Ownership Explained: Rights, Risks, and What Every Co-Owner Should Know

Tenants in common (TIC) is the most flexible form of co-ownership in real estate. It lets two or more people own a property together with unequal shares, independent rights to sell or transfer their interest, and no automatic survivorship. About 35% of all co-owned residential properties in the United States are held as tenants in common.

If you're buying property with a friend, investing with partners, [inheriting](/blog/inheriting-house-complete-guide) property with siblings, or exploring [alternatives](/blog/heloc-alternatives) to condominiums, understanding TIC ownership is essential. This guide covers how it works, what can go wrong, and how to protect yourself.

What Is Tenants in Common?

Tenants in common is a form of concurrent property ownership where two or more people each hold an undivided fractional interest in the entire property. "Undivided" means no owner has exclusive rights to any specific portion of the property — each owner has the right to use and occupy the entire property.

Key Characteristics

• Unequal ownership shares are allowed. One owner can hold 70% and another 30%. Shares don't have to be equal.
• No right of survivorship. When a TIC owner dies, their share passes through their estate (via a will or intestacy laws), not automatically to the other co-owners.
• Each owner can sell, transfer, or mortgage their share independently. You don't need permission from other co-owners to sell your interest.
• Each owner can be on a separate deed. Co-owners don't need to acquire their interests at the same time or through the same transaction.
• Any owner can force a sale. Through a legal action called partition, any co-owner can compel the sale of the entire property.

How Shares Work

TIC shares represent a percentage of ownership, not a physical portion of the property. If you own 25% as a tenant in common, you don't own one specific room or one quarter of the yard. You own a 25% undivided interest in the whole property.

This distinction matters for practical reasons. All co-owners have equal rights to use and occupy the entire property regardless of their ownership percentage. A 10% owner has the same right to be on the property as a 90% owner.

However, income, expenses, and proceeds from a sale are typically divided according to ownership percentages.

How TIC Ownership Is Created

Default Co-Ownership

In most states, when property is conveyed to two or more people who are not married, TIC is the default form of co-ownership. If the deed says "to Alice and Bob" without specifying the type of tenancy, Alice and Bob are tenants in common.

Exceptions:

• Some states presume joint tenancy for married couples
• A few states have different default rules

By Deed Language

To explicitly create a TIC, the deed would read something like: "to Alice, an undivided 60% interest, and Bob, an undivided 40% interest, as tenants in common."

Through Inheritance

When multiple heirs inherit property through a will or intestacy, they typically receive it as tenants in common. This is one of the most common — and most problematic — ways TIC ownership arises.

Through Severing a Joint Tenancy

If one joint tenant sells or transfers their interest, the joint tenancy is severed and converts to a tenancy in common with the new owner.

TIC Agreements: The Most Important Document You'll Sign

If you're entering a TIC arrangement voluntarily (as opposed to inheriting one), a TIC agreement is absolutely critical. Without one, you're relying entirely on state default rules, which rarely address the practical issues that come up.

What a TIC Agreement Should Cover

Ownership percentages and financial obligations:

• Each owner's percentage interest
• How mortgage payments are split (proportional to ownership, equal, or some other arrangement)
• How property taxes, insurance, and maintenance costs are divided
• What happens if one owner can't or won't pay their share
• How capital improvements are handled and whether they affect ownership percentages

Use and occupancy:

• Which owner occupies which portion of the property (if it's a multi-unit building)
• Rules for common areas
• Whether owners can rent out their portion
• Guest policies, pet policies, noise rules

Transfer restrictions:

• Right of first refusal — giving other co-owners the chance to buy a departing owner's share before it's sold to an outsider
• Approval requirements for new co-owners
• Restrictions on who can purchase a TIC interest
• How the interest is valued when a co-owner wants to sell

Dispute resolution:

• Mediation before litigation
• How to handle disagreements about repairs, improvements, or expenses
• Process for buyouts
• Partition restrictions (though courts can override these in some cases)

Death and disability:

• What happens when a co-owner dies (does the agreement require their heirs to sell?)
• Insurance requirements (life insurance to fund buyouts, for example)
• Power of attorney provisions for incapacitated owners

Cost of a TIC Agreement

Having an attorney draft a comprehensive TIC agreement typically costs $2,000–$5,000. For expensive properties or complex arrangements, costs can reach $10,000+. This is not a document to DIY from a template — the stakes are too high.

TIC Financing Challenges

Financing is the biggest practical challenge with TIC ownership.

Group Loans

Traditionally, TIC co-owners obtained a single mortgage that covered the entire property, with all owners on the loan. The problem: if one owner stops paying, the others must cover the shortfall or risk foreclosure on the entire property.

Fractional TIC Loans

In recent years, some lenders (particularly in San Francisco, where TIC ownership is common due to high real estate prices) have started offering fractional TIC loans. Each co-owner gets their own mortgage secured by their individual TIC interest.

Companies like Sterling Bank & Trust and National Cooperative Bank have been pioneers in TIC fractional lending. Interest rates are typically 0.5%–1.5% higher than [conventional mortgage](/blog/conventional-loan-requirements) rates, and down payment requirements may be stricter (often 20%–25% minimum).

Fractional loans solve the biggest risk of group financing: if one owner defaults, only their interest is affected, not the entire property.

Cash Purchases

Some TIC co-owners avoid financing altogether by purchasing with cash. This is common in investor groups and family arrangements.

TIC vs. Other Forms of Co-Ownership

TIC vs. Joint Tenancy

The most important difference: joint tenancy includes a right of survivorship, meaning when one owner dies, their share automatically passes to the surviving owner(s). TIC does not — the deceased owner's share goes to their heirs.

Other differences:

• Joint tenancy requires equal ownership shares; TIC allows unequal shares
• Joint tenancy requires all owners to acquire their interest at the same time, through the same deed; TIC has no such requirement
• Joint tenancy is severed if one owner sells their interest; the new owner becomes a tenant in common with the remaining joint tenant(s)

TIC vs. Condominium

A condo gives each owner fee simple ownership of their individual unit plus a shared interest in common areas. A TIC gives each owner a fractional interest in the entire property.

Practical differences:

• Financing: Condo units are much easier to finance (standard mortgages apply). TIC interests require specialized lenders.
• Insurance: Each condo owner can get their own policy. TIC co-owners typically share a policy.
• Control: Condo owners have clear boundaries — they own their unit. TIC owners share everything and need agreements to define who uses what.
• Resale: Condo units are easier to sell because buyers understand them and can get conventional financing.

TIC vs. LLC or Partnership

Some co-owners hold property in an LLC or partnership instead of as TIC. This adds liability protection and creates a clearer governance structure (through an operating agreement). However, LLC-owned property can't be financed with a residential mortgage — you'll need a commercial loan at higher rates.

Tax Implications of TIC Ownership

Income Tax

Each TIC owner reports their proportional share of rental income and expenses on their individual tax return (Schedule E). If you own 40% of a TIC property that generates $30,000 in annual rental income and $20,000 in expenses, you report $12,000 in income and $8,000 in expenses.

1031 Exchanges

This is where TIC ownership gets particularly interesting for investors. Each TIC owner holds real property for tax purposes, which means each owner can independently do a [1031 exchange](/blog/1031-exchange-guide) when they sell their interest. This is a significant advantage over holding property in a partnership or LLC, where 1031 exchange options are more limited.

Delaware Statutory Trusts (DSTs) emerged partly because of IRS Revenue Ruling 2004-86, which clarified the conditions under which TIC interests qualify for 1031 exchange treatment. The IRS limits TIC arrangements to 35 co-owners for 1031 exchange purposes and imposes other requirements.

Property Tax

Property taxes are assessed on the entire property, not individual TIC interests. All co-owners are jointly and severally liable — meaning the county can collect the entire tax bill from any one owner.

Estate Tax

A TIC owner's interest is included in their estate at fair market value. Unlike joint tenancy (where only half is typically included in the estate of the first to die), the full value of the TIC interest is included.

The Partition Problem

Any TIC co-owner has the legal right to file a partition action — a lawsuit asking the court to divide the property or force a sale. This is both a feature and a risk of TIC ownership.

Types of Partition

• Partition in kind: The court physically divides the property into separate parcels, giving each owner their share. This is only practical for large tracts of land.
• Partition by sale: The court orders the property sold and the proceeds divided according to ownership shares. This is the most common outcome for residential property.

The Cost of Partition

Partition lawsuits are expensive. Attorney fees typically range from $10,000 to $50,000+, and the process can take 6–18 months. Courts may order the property sold at auction, which often results in below-market prices (sometimes 20%–40% below fair market value).

Protecting Against Partition

A TIC agreement can include partition restrictions — for example, requiring mediation and a buyout offer before any owner can file for partition. However, courts have the final say, and in most states, the right to partition cannot be completely waived. Courts will generally enforce reasonable restrictions (like a right of first refusal or mandatory mediation) but may not enforce outright prohibitions.

The Uniform Partition of Heirs Property Act (UPHPA), adopted in over 20 states, provides additional protections when TIC property is inherited. It requires courts to consider buyout options and fair-market appraisals before ordering a partition sale.

TIC in San Francisco: A Case Study

San Francisco has the largest TIC market in the country. Because condo conversion is extremely limited (due to rent control laws and conversion caps), many multi-unit buildings are sold as TIC interests instead.

A typical San Francisco TIC arrangement:

• A 3-unit building where each owner holds a 1/3 TIC interest
• A TIC agreement assigns each owner exclusive use of one unit
• Each owner obtains a fractional TIC loan
• The TIC agreement includes detailed provisions for maintenance, insurance, refinancing, and sale

Prices for TIC interests in San Francisco are typically 10%–20% below comparable condo units, reflecting the additional complexity and financing challenges.

The city has a condo conversion lottery that allows some TIC buildings to convert to condominiums, which instantly increases each unit's value. Winning the lottery has been described as one of the biggest financial windfalls in San Francisco real estate.

Common TIC Problems and How to Avoid Them

1. One Co-Owner Stops Paying

The problem: If there's a group mortgage and one owner stops paying, the others must cover the shortfall or face foreclosure on the entire property.

The solution: Use fractional TIC loans when possible. If using a group loan, the TIC agreement should require each owner to maintain a reserve fund (typically 3–6 months of their share of expenses). Include provisions for buyout or forced sale if an owner consistently fails to pay.

2. Inherited TIC Interests

The problem: Siblings inherit a family home as tenants in common. One wants to sell, one wants to live there, one wants to rent it out. Nobody agrees on anything.

The solution: If you're inheriting TIC property, get a TIC agreement in place immediately. If you can't agree, consider having one owner buy out the others or selling the property and dividing the proceeds. The longer disputes fester, the more expensive they become.

3. An Owner Sells to a Stranger

The problem: Without restrictions, any TIC owner can sell their interest to anyone, and the remaining owners suddenly have a stranger as a co-owner.

The solution: Include a right of first refusal in the TIC agreement. This gives existing co-owners the opportunity to match any outside offer before the interest can be sold to a third party.

4. Disagreements About [Property Management](/blog/property-management-complete-guide)

The problem: One owner wants to renovate; another doesn't want to spend the money. One owner has a dog; another is allergic.

The solution: A detailed TIC agreement that covers management decisions, [improvement](/blog/heloc-vs-home-improvement-loan) procedures, and house rules. Major decisions (over a certain dollar threshold) should require unanimous or majority approval.

Frequently Asked Questions

Can one tenant in common force the sale of the entire property?

Yes, through a partition action. Any co-owner can file for partition regardless of their ownership percentage. A 1% owner can force the sale of a property over the objections of a 99% owner.

Can a TIC owner get a mortgage on just their share?

Yes, but options are limited. Fractional TIC loans are available from specialized lenders, primarily in major markets like San Francisco. Rates are higher and terms are stricter than conventional mortgages.

What happens if a tenant in common dies without a will?

Their TIC interest passes through intestate succession — to their spouse and/or children under state law. The other co-owners have no automatic right to the deceased owner's share (unlike joint tenancy).

Can tenants in common have different ownership percentages?

Yes. This is one of the key advantages of TIC over joint tenancy. Ownership shares can be split in any ratio — 50/50, 70/30, 33/33/34, or any other combination.

Is a TIC interest considered real property or personal property?

Real property. Each TIC owner holds a direct interest in real estate, which is why TIC interests qualify for 1031 exchanges (unlike partnership interests, which are considered personal property).

Can a TIC agreement prevent partition?

Not entirely. Courts generally uphold reasonable restrictions (mediation requirements, buyout provisions, rights of first refusal) but typically won't enforce a complete waiver of the right to partition. The best approach is to make partition the last resort by providing multiple off-ramps in the TIC agreement.

The Bottom Line

Tenants in common ownership offers flexibility that other forms of co-ownership don't — unequal shares, no survivorship requirements, and independent transfer rights. For investors, the ability to do 1031 exchanges on individual TIC interests is a powerful tax advantage.

But TIC ownership also carries significant risks: financing difficulties, the partition threat, and the potential for co-owner disputes. The difference between a successful TIC arrangement and a disaster usually comes down to one document: a comprehensive TIC agreement drafted by an experienced [real estate attorney](/blog/how-to-build-real-estate-team).

If you're considering TIC ownership, budget $2,000–$5,000 for a proper TIC agreement. It's the best investment you'll make in the deal.

Related Articles

• 1031 Exchange for Beginners: Complete Guide to Deferring Capital Gains Taxes
• 1031 Exchange: Defer Taxes, Build Wealth Faster
• Property Taxes Explained: How They Work and How to Reduce Them