What is a Tenancy in Common?
Tenancy in common is established when two or more individuals place their names on the deed to the property and therefore own the property together. A tenant can own unequal shares and can have different ownership interests. Owning property via a tenancy in common has grown in popularity due to property price increases.
What Does Type of Property can a Tenancy in Common Apply to?
Tenancy in common can apply to office buildings, undeveloped land, office space, or a house.
What are Space Assignment Co-Ownership Tenancy in Common?
Property can be held as a space assignment co-ownership tenancy in common. Essentially, these are similar to condominiums in that an individual assigns houses, apartments, rooms, officers, stores, or storage spaces to each owner. Additionally, particular tenants in this configuration have rights created in a contract that are signed by all co-owners.
A space assignment co-ownership tenancy in common can be more popular because local condominium conversion restrictions do not apply to tenancy in common conversions.
Is a Tenancy in Common Conversion Legal Everywhere?
In California, individuals may form a space assignment co-ownership tenancy in common for any commercial or residential building. Furthermore, the location of the building, its zoning, size, layout, age, unit mix, or construction do not matter for regulatory purposes.
What are the Tenants in Common Rights and Liabilities?
The following is a list of the rights and liabilities that tenants in common have:
Transfer Ownership Rights in Tenants in Common Property Ownership
Each tenant in common has the right to transfer their ownership interest to a third party. Essentially, the tenant in common can sell, gift, or mortgage their share. Should the other tenants in common be negatively affected by this transfer, the owners must all agree to the transfer.
Income from Property Rights in Tenants in Common Property Ownership
Each tenant in common has a right to share the income produced from the property. Thus, each tenant in common may receive the income that is proportional to their share of ownership interest they have on the property.
Property Expenses Responsibility in Tenants in Common Property Ownership
Each tenant in common shares responsibility of the property expenses. This responsibility is based on the percentage of ownership interest each tenant in common owns. To use an example to demonstrate, if a tenant in common has 60% ownership, they will pay 60% of the expenses.
Creditors Interest in Tenants Common Property Ownership
If a creditor gains an interest in the property, all tenancy in common owners may need to sell the property. However, the other tenants in common can be compensated for the sale of the property based on the percentage of their ownership interest.
How Do You Terminate?
A co-owner can terminate the tenancy in common by selling, conveying, or transferring their interest in the property to a third party.
What are the Tax Implications of Tenancy in Common?
In addition to the rights and responsibilities of co-owners, it is important to consider the tax implications of tenancy in common. Each co-owner must declare their share of the property’s income and expenses, if the property is rented out, each co-owner reports his or her share of the rental income on the tax return. Similarly, co-owners share expenses in proportion to their ownership. This means that co-owners must keep clear financial records of all income and expenses.
Can One Co-owner Force The Others to Sell The Property?
Yes, a co-owner can file a partition action – a lawsuit to divide the property. If the other co-owners do not agree to the terms of ownership, one of them can go to court. This forces the sale of the property or allocates their share. Often, the court will order the sale of the entire property, followed by a distribution of the proceeds to the co-owners. Thus, even if most unit owners oppose the sale, the court can still order it.
What are The Alternatives?
As an alternative to court partition, co-owners may enter into a tenancy in common agreement. Such a document governs:
- The use of the property
- The distribution of income
- The payment of expenses
- The mechanism for resolving disputes
This is especially important if the owners are not related or do not live together. The contract will help prevent conflicts and avoid lengthy litigation in the future.
California Real Estate Attorney
If you thinking of creating a tenancy in common, please contact KAASS LAW. (310) 943-1171 for a consultation. Our attorneys will provide the legal assistance you need to help create a tenancy in common for you.