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Tenants in Common Defined  Quite simply, Tenants in Common is nothing more than a form of legal ownership of property. Some of the most common forms of ownership are as follows:
- Sole Ownership – Owned entirely by one person.
- Joint Tenancy – Property owned by more than one person. Each tenant has an undivided right to possess the whole property and a proportionate right of equal ownership interest. Title automatically passes to the surviving tenant at death.
- Tenancy in the Entirety – A special form of joint ownership that requires both owners to approve any sale of the property. The joint tenants are husband and wife and neither spouse can transfer their interest without the consent of the other.
- Tenants in Common – a form of owner for two or more owners. The individual interests do not have to be equal and the owners enjoy a proportionate right to the property. Title passes to the estate of the deceased owner and the person named by the estate assumes their proportionate title to the property and becomes the new tenant in common with the surviving tenants in common.
The Tenants in Common structure is not new. The structure has, however, received considerable attention since the IRS revenue ruling (Revenue Procedure 2002-22), which essentially laid out the guidelines for tenants in common investments to qualify as an eligible property for purposes of a 1031 exchange. Tenants in common owners are considered direct owners, are listed on the deed and are considered a direct owner in the property with an undivided interest. If the tenants in common owners invest in real estate, the owners receive their proportional share of the income, tax benefits, and appreciation of the property.
Tenants in Common investments are structured by “sponsors.” These sponsors script a Tenants in Common Agreement, which typically calls for employment of professional management. Major decisions regarding the investment property are determined by vote of the tenants in common owners.
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