Series 22: 3.9.1. Tenancy In Common (TIC)

3.9.1.  Tenancy in Common (TIC)

Tenancy in common is the joint ownership of property by two or more people in equal or unequal shares. Shares are undivided, meaning that no owner has the exclusive right to any piece of the property, and all owners have an equal right to the entire property. Moreover, each tenant has the right to leave his share of the property to any beneficiary he chooses. This contrasts with joint tenancy, where the beneficiaries must be the other property owners.

A tenancy in common is not a business entity. Unlike a real estate partnership or LLC whose members own a share in the entity, members of a tenancy in common purchase an undivided share of the real estate. This distinction is critical for an investor who wishes to enter or leave a TIC through a like-kind exchange.

Example: Salina owns a rental property valued at $800,000. She wishes to invest in a commercial property currently for sale at $2.4 million. Unable to afford it herself, she convinces two cohorts to join her in acquiring this property. Salina sells the rental property and exchanges all of the debt and equity from the sale for a one-third interest in the property. The other two investors provide the rest of the necessary funds. They create a tenancy in common agreement, by which each tenant has a