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A tenant-in-common agreement is a legal document in which two or more parties interested in owning a piece of land or real estate assets come together. Tenants are known as independent owners controlling an equal percentage of the total property. They might also hold a different percentage of the total property. You must know that the property being held can be residential or commercial. Therefore, this implies that the property being held can be residential or even commercial.

Furthermore, a tenant common agreement can put forward their share of the property to a named beneficiary upon passing away. A tenant common agreement marks up to be one of the types of shared ownership. The other two types of shared ownership include joint tenancy and tenancy by entirety. You must note that a common tenant has no right of survivorship. This implies that the deceased share of the property will be passed on to the estate. Afterward, a beneficiary of the property share may be called in. Tenancy in common agreements can be created at your convenience. An individual may also join after the other members have entered into a TIC arrangement.

Joint Tenancy vs. Tenant in Common Agreement

A piece of property or an asset might be owned by one or more than one person. In cases where two or more people own an asset, both of them share the property. The manner of ownership can be either a joint tenancy or tenancy in common. The property is shared as a whole instead of ascertaining specific areas to another party. Joint tenancy is similar to a common tenant agreement. However, there are certain areas in which they completely vary from each other.

  • Ownership: Tenancies in common agreements may have unequal shares of different ownership interests. However, in joint tenancy, the property should have equal shares. It is to be done in the same deed and at the same time. The terms in both of these agreements are outlined legally. The outlines are legally binding and belong to the property ownership document.
  • Termination: A joint tenancy can be broken if one of the owners transfers his asset to another person. This changes the ownership arrangement to a tenancy in common. Plus, it applies to all parties. However, a tenancy in common can be broken only if one or more tenants buy the other. Further situations may include the property being sold and distributed amongst the owners. If you apply for a partition action, the former tenants can choose joint tenancy. However, it depends on their free will, and there is no obligation to do so.
  • Right of Survivorship : With regard to the rights of survivorship, under joint tenancy, the interest of the deceased owner is transferred. This is done to his remaining surviving owners. However, common tenants do not have this advantage. This is because the transfer only happens if the deceased person mentions it. This is to be mentioned in a will or any other instrument.

Thus, these are the differences between a joint tenancy and a tenant-common agreement. Both of these agreements have their pros and cons. Thus, when you go ahead and get any of these agreements, access them properly. Furthermore, make sure you record any statement you would want to operate in the future in the form of a will. Therefore, do all the requirements and contact your attorney. Conducting a session with your attorney will help you understand the recent laws and take advantage of the most convenient tenancies.

Property Taxes on a Tenant in Common Agreement

A tenancy in common agreement does not assign different taxes based on the amount of property an individual has. This is because the tenants in common receive a property tax bill. A property tax is the annual sum of money a landowner must pay to the governing body of his area. However, in many jurisdictions, a tenancy in common agreement imposes a joint liability. In this, each independent owner may be liable to pay the full amount of the tax. Regardless of the asset's ownership percentage, liability is connected to every owner. According to the U.S. Census Bureau, 1.02% of an average American's home value is in yearly property taxes. Between 2019 and 2023, property taxes have increased at a rate of 25%. Property Taxes are known to help schools and other institutions grow. This is why a higher tax rate is currently in effect. It is to be noted that no state in the U.S. escapes from property tax. However, some states offer a lower rate of tax than others. This can vary from age to the type of property you are owning.

Some states in which property tax is high include New Jersey, New Hampshire, and Connecticut. Each has a property tax rate of 2.21, 1.96, and 1.76 percent. There are added provisions for seniors above sixty-five in the U.S., too. This includes South Dakota, Washington, Florida, and Alabama. Alaska, South Carolina, and Georgia join the list too. Therefore, taking note of the above states and the rate, you can decide which state you would like to purchase a property in.

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Reasons for Disputes in a Tenant in Common Agreement

Despite tenants sharing common rights, disputes do occur. Below are the reasons why:

  • Lack of Understanding: If one of the tenants misunderstands the other party, it creates issues. This results in a dispute. Therefore, to stop this from happening, both parties should understand. Furthermore, bringing in effective measures to curb away any scope of misunderstanding is beneficial, too.
  • Maintenance Issues: Both parties are given the right to maintain the property. However, issues do occur when the maintenance area becomes shaky. To prevent this, one must plan and plot with the other party. This enhances understanding and helps foster a good relationship.
  • Misuse of the Property: One among both parties may misuse the property. This may lead to a huge dispute. In certain cases, legal considerations are added, too. Thus, to prevent this, ensure none of the parties misuse the property.

These are some of the reasons why disputes occur in a tenant-common agreement. Opening up the scope to hear and increase partnership puts a hold on this. Doing this on a large scale is beneficial. This is because it helps in fostering better relationships between the two parties.

Key Terms for Tenants in Common Agreements

  • Agents: Responsible for buying, selling, and letting property.
  • Appraisal: When selling a house, an estate agent will appraise the property to determine its current value
  • Arrears: The amount of rent overdue due to being behind in payments.
  • Assured Tenancy: A type of residential tenancy that grants the tenant a degree of security of tenure.
  • Assured Shorthold Tenancy: This is the most frequently used tenancy agreement by landlords when letting residential properties.

Final Thoughts on Tenants in Common Agreements

A tenant common agreement gives an individual many privileges. It is one of the three types of ownership where two or more parties share interests in real estate. Owners not only share common thoughts about owning an asset but also regarding its financial or proportional share of the property. Equal rights are shared by the tenants, which means that there is no scope for favoritism.

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ContractsCounsel is not a law firm, and this post should not be considered and does not contain legal advice. To ensure the information and advice in this post are correct, sufficient, and appropriate for your situation, please consult a licensed attorney. Also, using or accessing ContractsCounsel's site does not create an attorney-client relationship between you and ContractsCounsel.

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