Why Choose Tenants in Common?
When more than one person purchases a property together on one title, they are entering a contracts in common agreement. While each person may hold a different percentage of rights to the property, the title is named to everyone in the agreement.
Co-tenants under this type of agreement do not have to be relate, do not have to co-habitate on the property, and there is no limit to how many people can enter the agreement together. Anyone can enter this type of tenancy deal, whether it be two brothers or fifty unrelated investors.
Let's consider a sample scenario of why this type of agreement may be used. Say Mike has stumbled across a great home that he would like to purchase, but he does not have the money to buy it on his own or the time to keep up with the maintenance alone. He decides to purchase it along with a couple friends who will live with him as roommates.
All of the roommates will have legal access to the home since they are on the title, but Mike perhaps holds 50% of the property while the roommates share the other half. They are all still in agreement to keep up with maintenance repairs and other mutual living expenses.
So, what happens if Mike decides he can now afford a new home on his own and wants out of this agreement? The other roommates can buy him out of his share of the home or it can be put up on the market. All of the sale proceeds would split among the roommates, according to the percentages owned by each.
Property investors are also using this type of agreement on a regular basis now. Someone who owns a project property may list a number of investors on the title as co-tenants. This is done to ensure a cut of the profit when the project is complete and the property is historically sold. In this case, the investors may never live in or occupy the property at all.
There are some bad situations that can occur with this type of tenants in common agreement, especially when co-tenants disagree or just do not get along. It is a good idea to work with a knowledgeable lawyer before signing into a tenancy agreement. Know your rights and responsibilities before you become a co-tenant.