What is a Tenants in Common Agreement?

When more than one person decides to purchase a single property and own it mutually, the deal is often termed a tenants in common agreement. They become co-tenants, in which each one may hold a different percentage of ownership over the property.

You can enter a tenants in common agreement with two people or sixty people. There is no limit on the number of people who can sign into the mutual ownership agreement, and there is no requirement that co-tenants be relatives or in any other sort of relationship. It also does not matter which co-tenant, if any, actually makes regular use of the property.

Let's consider a situation in which the tenants in common agreement may be effectively used. Let's imagine a young man named John wants to purchase his first home. He finds a house he really likes but he doesn't have the time to upkeep the property alone. So, he brings a couple friends into the agreement so they can live with him as roommates and share the expenses.

All of the co-tenants can legally have access to the home when needed, even though John may hold half of the ownership with the other half split between the others. All may agree to be responsible for upkeep of the property while they live there.

If a couple years later John gets married and decides he needs out of the agreement to move on to a new home with his bride, he will have to let his roommates buy out his share of the property so they can remain. If they all agree to let the property go, it will be sold with the profits being distributed according to percentage owned.

Another situation for this type of agreement is in the real estate business. Investors may sign onto a project home, each owning different percentages. When the project is complete, the home can be sold with the profit distributed amongst all co-tenants. In this situation, none of the co-tenants may ever actually live in the home they own together.

This can be a tricky agreement to enter, especially if it is for business purposes or you have a falling out with your co-tenants. If you are thinking about entering into a tenants in common agreement, it is best to talk the deal over with an attorney who can point out any potential risks or pitfalls that may come up.