What is a “TIC” in Real Estate?

published Jul 31, 2021
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Have you ever been daydreaming with your friends, talking about how it’d be fun to buy a home together and each live in a separate wing? Or maybe you’ve bounced around the idea of purchasing property with siblings as a creative way to afford a home in an expensive city?

Enter the tenancy in common agreement, or TIC for short, which can make these not-so-far-fetched ideas a reality. But what exactly does this lesser-known real estate move entail?

In a nutshell, a tenancy in common agreement allows for multiple people to share ownership of property while maintaining individual rights, such as owning unequal shares of the property and retaining the ability to transfer, sell, or bequeath just your share to your heirs, explains Michelle Quinn, a partner at New York City real estate law firm Gallet Dreyer & Berkey.

“Despite an unequal ownership interest, all owners have an equal right to possess the property.  This distinction can lead to confusion about owners’ respective rights, which is why an agreement detailing each owners’ rights — and limitations — is important,” she says. 

The most common example of a TIC, Quinn says, is when relatives or friends pool their money to purchase a vacation home and have an equal right to possession. Another instance where TICs may arise is when family members inherit a piece of property together as a joint tenancy, says David Reischer, attorney and CEO of LegalAdvice.com.

“Parents frequently bequeath a piece of property to their children as a joint tenancy with a survivorship interest,” Reischer says. “This means that the property is not owned by any one individual, but instead, is shared as a whole with the person that lives longest to retain full rights upon the death of the other person.” 

Tenancy in common agreements are also sometimes used when professionals purchase a property for investment purposes, explains Bill Samuel, a residential real estate developer with Blue Ladder Development. A benefit in these scenarios is that you can assign a specific ownership percentage of the property to each party (i.e. one investor could be a 70 percent owner and another a 30 percent owner). 

A TIC can make sense for people who need some flexibility in ownership, or when prospective owners don’t have equal purchasing power, Quinn explains. For instance, having combined financial assets could help the group get a loan if one owner’s credit history isn’t good enough to purchase alone. (While you could have a minimum credit score of 580 to qualify for an FHA loan, a score of 740 to 760 will nab you the best interest rates and terms when you’re taking out a mortgage). 

But here’s where things can get a little dicey with TICs: These arrangements mean that all owners are liable for 100 percent of any default by the other owners, Quinn says. The flexibility of one owner’s sale also means you could potentially end up as a co-owner with a complete stranger, she explains.

The takeaway? A TIC could work in the right scenario, but if you’re risk-averse, these types of agreements may not be for you. 

“For many, a tenancy in common is more risky than the flexibility that it affords is worth, as co-owners have limited control over what happens to the property and the actions of the co-owners,” Quinn says.