Tenants in common is a type of real estate ownership in which two or more individuals hold an undivided, fractional interest in the same piece of property. This means that each owner has an equal right to possess and use the entire property, regardless of their respective percentage of ownership.
In Maryland, tenants in common is one of the most common forms of joint ownership.
Characteristics of Tenants in Common
There are several key characteristics that define tenants in common:
- Each tenant in common owns a distinct share or interest in the property.
- The shares do not need to be equal and can vary among owners.
- Each owner has an unrestricted right to transfer their share without seeking permission from the other owners.
- All owners have equal rights to use and enjoy the property, including the right to occupy and lease their portion of the property.
- When one owner passes away, their share is passed on to their heirs or beneficiaries.
Creating a Tenancy in Common
In Maryland, tenants in common can be created in three ways:
- Conveyance by deed: A tenancy in common can be established through a deed that clearly states the intent for joint ownership.
- Inheritance: If an individual inherits property from a deceased relative who was a tenant in common, they automatically become a tenant in common with the remaining owners.
- Severance of joint tenancy: If a joint tenancy is severed in Maryland, the remaining owners automatically become tenants in common.
Benefits of Tenants in Common Ownership
There are several benefits to owning a property as tenants in common:
- Equal Ownership: Each tenant in common has an equal right to use and enjoy the property. Regardless of their contribution towards its purchase.
- Flexibility: Tenants in common can own unequal shares of the property, providing flexibility in terms of investment amount and decision-making power.
- Individual Control: Each tenant in common has individual control over their portion of the property. This includes the ability to use and lease it without seeking permission from other owners.
- Limited Liability: Each tenant in common is only liable for their share of ownership, protecting them from personal liability for the entire property.
- Tax Benefits: Tenants in common can take advantage of tax deductions and benefits for their individual share of ownership, reducing their overall tax burden.
Potential Risks of Tenants in Common Ownership
While there are many advantages to owning a property as tenants in common, there are also some potential risks to consider:
- Disagreements with Co-owners: As each owner has equal rights and control over the property, disagreements can arise regarding its use, maintenance, and management.
- Unequal Contributions: If one owner contributes more towards the property’s purchase or maintenance, it can lead to conflicts and disputes over the division of profits or expenses.
- Difficulty in Selling Shares: It may be challenging to find a buyer for an individual share of ownership in a tenants in common arrangement, as potential buyers may prefer sole ownership.
- Involuntary Sale: If one tenant in common files for bankruptcy or passes away, their share of ownership may be involuntarily sold to cover their debts or distributed according to their will.
Conclusion
Tenants in common is a popular form of joint ownership in Maryland that offers both advantages and disadvantages. It is important for individuals considering this type of ownership to carefully consider their options. Consult with a legal professional before entering into an agreement.
With proper planning and communication among owners, tenants in common can be a successful and beneficial form of real estate ownership.
It is recommended to document all decisions and agreements made among owners to avoid potential conflicts in the future. Additionally, it is important for each owner to thoroughly understand their rights and responsibilities within a tenancy in common arrangement.
So, it is crucial to do thorough research and seek professional guidance before entering into this type of joint ownership.
References
- “Tenants In Common.” LawDepot, www.lawdepot.com/contracts/tenants-in-common-agreement/?loc=US.
- “Tenants in Common.” Investopedia, 18 Feb. 2021, www.investopedia.com/terms/t/tenantsincommon.asp.
- “Tenants in Common (TIC).” The Balance, 27 Oct. 2020, www.thebalance.com/tenants-in-common-tic-1798728.