Most people think of the word "tenants" in terms of renters, however, the term "tenants in common" refers to two or more people who hold title or ownership in one property. This is sometimes also referred to as a "tenancy in common title". Let's dig in and learn a little more about this buying trend.

Who are Tenants in Common?

With tenants in common, the relationship between the parties (if any) doesn't matter. The individuals involved can be friends, investors, a couple or complete strangers. Essentially, buying a home as tenants in common creates a way for two or more unrelated, unmarried individuals to jointly purchase a home together. However, it's important to note that the ownership percentage of the home is not necessarily equal. Say three people are buying a home together as tenants in common - Harry, William and Katie. It's possible for Katie to hold 50% ownership in the home while Harry and William each hold 25% ownership. All parties sign the title with the lender and all parties are equally liable to ensure financial obligations of the property are met, no matter what their ownership percentage is.

The Downside of Tenants in Common.

Unlike a rental agreement, getting rid of one of the tenants is extremely difficult and often requires either buying the person out entirely or selling the home and splitting the profits between the tenants in common based on their ownership shares. This means it's very important that you really know and trust who you are entering into this type of homebuying agreement with.

No tenant or tenants can exclude or remove any other tenant from the property, even if that tenant is failing to meet their part of the financial obligations. Because the lender has all parties sign the title, in our scenario above, if Harry stops paying his portion of the expenses, William and Katie are obligated to cover his share and ensure the terms of the loan are met (i.e. the mortgage payment is made). They cannot deduct his share from the mortgage payment as they are all equally liable to ensure the entire payment is made.

Buying a home as Tenants in Common is a growing trend as more and more single individuals decide to invest in home ownership but are unable to do so individually whether because of income requirements or credit history. It's a beneficial arrangement as it provides a way for two or more parties to buy a home together without being married or related, but it does have risk factors. Before considering this type of home buying arrangement, it's important to explore all of the risks and benefits with an experienced real estate attorney.