How Should Two (or More) People Own Property? (Part III)

In Part III of this three part series, one of the more common forms of ownership will be examined, the Tenancy in Common.

Tenancy in Common

Tenancy in common is one of the most common types of ownership in North Carolina between persons other than husband and wife. A tenancy in common exists when two or more persons own the same land with undivided interests.  Each tenant in common owns a separate, but undivided interest in land and each has an equal right to possession and use of the land. For example, two people each may own a one-half (½) undivided interest on tract of land and each of the owners is entitled to the use and possession of all of the property.

Tenants in common need not own the same interest in the land. For example, one tenant may own a one-half (½) interest, another a one-fourth (¼) and another a one-fourth (¼) interest. Each owner is free to sell, encumber, and allow that owner’s interest in the property to pass by will or intestate succession to the owner’s heirs or devisees (the other owners having no right of survivorship in any other owner’s undivided interest in the property).

Although a tenancy in common allows each owner the freedom to dispose of that owner’s interest in the property as that owner chooses, there are concerns that anyone taking title to property as a tenant in common should consider.

Each tenant in common is responsible for and must contribute his/her pro rata share toward payment of taxes, special assessments and the costs of repairs to the property.  If one owner pays the taxes or makes necessary repairs, that owner is entitled to contribution from the other owners.

Generally, a tenant in common who possesses the property does not have to pay the other owners for possession of the property as long as the other owners are free to use and possess the property as well.  If, however, one owner denies the other owners the right to use and possess the property, those owners may take legal action to regain possession of the property and may be entitled to damages.

Tenants in common hold undivided interests in the land and no tenant in common can exclude the other from possession nor claim any specific portion of the property for himself. However, each tenant has an absolute right to force a partition of the property, which will operate to sever the ownership and divide the interests. If a court allows a partition, the property will be divided among the owners, with each becoming the sole owner of the portion of the property awarded to that owner.  If a physical partition of the land cannot be made without unreasonable hardship, the court may order the entire property to be sold and the proceeds divided among the owners according to their interests.

Overall, the type of ownership in which you take title to property can significantly affect the way in which you can use the property.  Whether you have inherited land or whether you have purchased or will be purchasing land, you should always speak to an attorney to make sure you understand your rights as a property owner.

Ryan C. Hawkins is a partner at Ferguson, Hayes, Hawkins & DeMay, PLLC and a member of the Real Property Section of the North Carolina Bar Association.