Tenants in Common

Definition tenants in common

Tenants in common is another popular type of property title. In joint tenancy, a joint tenant's interest in the real estate property is undivided whereas a tenant in common's interest is divided.

For example if John and Mary are tenants in common of 50 - 50 partners, then John and Mary each owns 50% of the real estate property separately.  There are situations where tenants in common property title would benefit real estate investors much more than either joint tenancy or joint tenants with rights of survivorship would.

Why is tenants in common popular?

Tenants in common real estate title has gained popularity fast because of the IRS ruling regarding like kind exchanges where there have been multiple owners of the real estate.

If a real estate investor and a few friends buy a real estate property together, the real estate investor needs to hold the real estate property as tenants in common or he or she will not be able to do a like kind exchange individually upon sale.

If the real estate investor wants to use an LLC to hold his or her real estate interest, the real estate investor would have to first set up the tenants in common and then have one of the tenants in common be the LLC. The real estate investor's partners could then own their individual tenancy in either their own name (no asset protection) or their individual LLC.