What is Tenancy in Common and Why are We Hearing About It Now?
Have you noticed an uptick in news stories about Tenancy in Common lately? We have too and thought you might be wondering what this is and why this way of buying real estate is in the news lately.
Let’s back up a little and review some of the ways that you can purchase real estate with another person.
Tenancy in Common is the default type of property ownership in South Carolina. So, if your deed just has several names on it but no other specific language, that is how you own the property. This means all of the parties own a certain interest in the property (which could be equal or unequal interests) but also unfortunately means that if one of the parties passes, their share will go through probate and the ultimate disposition of the deceased person's share will be determined by his or her will. This has led to numerous clients of ours having to unexpectedly deal with having to get half of a house through probate before the surviving spouse can do anything with the property.
Another way that we see residential property purchased is called joint tenancy with a right of survivorship. Usually married couples buy a house this way. Each has equal ownership and if one spouse dies there is a right of survivorship. This means that if one spouse dies then the surviving spouse owns the house. This just takes a few additional words on the deed, but it still commonly omitted or just not asked about at closing.
What Are the Pitfalls of Tenancy in Common?
Tenancy in Common can lead to some potential issues between co-owners, especially when they are not married but are in a romantic or business relationship with one another. What follows are a few of the potential pitfalls.
If there is a mortgage rather than outright purchase, all borrowers agree to the terms of the mortgage. If payments are made in full and on time, then everything is fine. But what if one person loses their job or has an accident and is unable to work? If full payments are not made, the lender can seize the property and the remaining tenants can lose their investment and/or their home.
What if one person passes away unexpectedly? Their share of the property then passes to his or her heirs. In the case of an unmarried person this could be several siblings or parents who are divorced or dozens of other situations. As you can imagine this can quickly get very complicated. If the deceased tenant does not have an estate plan or will in place, the complexity increases exponentially. Their heirs could even force the sale of the property to get the value of their share.
What if one person gets a job in another city? They may want to use their equity in the property to finance their move and perhaps purchase property in their new city. This can be difficult or outright impossible if the other owners are not in agreement.
What if one person does not want to contribute work or funds to the upkeep of the property? This can be very difficult to handle if one person does not want to help with housework, yardwork, or routine maintenance of the property. If the property is not maintained it loses value, and this affects all the tenants.
Are There Better Alternatives?
Depending on the situation, we believe there is almost always a better alternative to tenancy in common. This could include owning property jointly with a right of survivorship, in a life estate, in a trust, or setting up a business to own the property, just to name a few alternatives. Each have their own pros and cons.
At Stratton and Reynolds our experienced attorneys stay current on the ins and outs of new legal strategies. We can advise you about all the pros and cons so you can make an informed decision. Call us today at 803-358-7214 or complete the contact form if you are thinking about owning property with someone else and want to explore your options.
