Tenants-in-common
Tenants-in-common is an arrangement that is characterized by multiple people deciding to purchase one property together. This can be either a primary residence or a vacation home. Basically, a tenants-in-common arrangement is a split homeownership among multiple people. A tenants-in-common arrangement does not have to be an equal ownership. Tenants can own different percentages of the same property.
Tenants-in-common provides a framework for buyers to structure how the property operates. This includes decisions on how to split costs associated with the home to more major decisions concerning the property. While each person owns a share of the property and has rights to live on and use the property, the amount they pay for the mortgage, insurance, and maintenance will vary based on the ownership share.
Advantages
A big advantage of this agreement is the financial advantage. For people who can’t afford to buy a property on their own, a tenants-in-common arrangement works well. This is because all deposits and payments are divided, making the purchasing and maintaining of the property to be less expensive. Borrower capacity may also be greater when an individual with a higher income owners a larger percent of the home.
Tenants-in-common may also be attractive for people who only plan on using a home for a short period of time, such as during the holidays or the summer. If this is the case, the person can choose to have a smaller share of the home.
Finally, a tenants-in-common arrangement allows individuals to choose who gets their share of the property in the event they die. They can also choose to sell their ownership or pass it on to someone else should they not want the property anymore.
Disadvantages
While it can be an advantage that a tenants-in-common arrangement is easily transferable, it can be a disadvantage for others. Any owner can sell their share at any time without the consent of the other owners. This could result in the other tenants living with someone that they don’t know or like.
Since everyone is responsible for payments, if one or more borrowers cease their payments, the other tenants must cover the payments or face foreclosure.
Tenants may also file a partition action, which would force unwilling co-tenants to sell the property.
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