Does Marriage Override Tenants-in-common?

Tenants-in-common structures are a way to share ownership of commercial or residential properties with others. This form of tenancy offers individuals and couples benefits and rights that aren’t granted through other forms of ownership such as joint tenancy.

Investing in property ownership through tenants-in-common allows you to enjoy full use of the property at a fraction of the total upfront investment cost.

What Is a Tenants-in-common Agreement?

Two or more people that want to own property together can do so through a Tenants-in-common (TIC) agreement In this agreement, the members retain ownership of the property through shares. Each member will have their name on the property’s deed.

In TICs you don’t need consent from the other members to sell your shares, and you have the right to name beneficiaries who will inherit your share. Each owner has full access and use of the property, though agreements can specify the use of space or restrict spaces.

Members of TIC agreements are permitted to own as much or as little percentage of the property as they’d like because ownership shares do not have to be equally distributed to members. For instance, one TIC member may retain 60% ownership, while another retains 10%, and a third retains 30% ownership.

This differs from a joint tenancy, where ownership is split equally and shares of your ownership are automatically granted to the remaining owners upon your death. The distribution of profits, and responsibility of losses and debts in TIC agreements are also different.

In TICs, the percentage of profits, losses, and debts created by the property is proportionate to your ownership share. This includes capital gains, property taxes, maintenance costs, and other services your property may need. If you have 25% ownership of the property, you’ll receive 25% of the profits. The agreement also allows individual members to use their shares to take out loans.

Types of TIC Agreements

There are two main types of TIC agreements, defined by how the property is used. In space assigned co-ownership (SACO) agreements members can choose to assign parts of the property for a specific use or to an individual owner. This includes creating office spaces, apartments, or designating common areas for everyone to use.

Time-assigned co-ownerships (TACO) agreements define the usage of the property through periods of time. Previously these agreements were called timeshares but are currently referred to as fractionals. They allow owners to use the property only during agreed-upon times.

TIC agreements can also take the form of an equity share. In this situation, one or more co-owners live in the property while other owners are investors of the property only. This type of agreement allows parents to help their children purchase a property they would be unable to afford on their own. It’s also used for investors who don’t want to manage the property independently.

Does Marriage Affect Tenants-in-common?

TICs allow individuals to share the deed of a property regardless of their relationship status. Married and unmarried couples can divide their ownership shares into any percentage, which is helpful if one member of the couple is more financially responsible for the property than the other.

Married couples are permitted to own real estate as tenants-in-common. Each person will own half the share of the property if they are the only owners. If you marry someone involved in a TIC agreement, you don’t automatically become joint investors. Your spouse may choose to sell you part of their share without it overriding the original TIC agreement.

Married couples who divorce and own their home through TICs have more options about their assets. One person can sell their portion of ownership to receive their portion of split finances without forcing the sale of the entire property.