I hate to break it to you but we are not discussing how much you and your roommate have in common.
Leave it to the real estate world to use the common term "tenant", normally referring to someone renting or leasing a property, to explain how much ownership you have of a property when you purchase it. How you are placed on title when purchasing a property is extremely important.Its good to review all of the options so that ifsomething happened you would be covered.Think about it a bit like insurance, except this isn’t title insurance, this is more like which insurance policy you pick.You have a few options; Joint Tenancy, in Severalty, or Tenants in Common are the most popular, if you will.A few months ago we covered Joint Tenancy in the J section of the Real Vocabulary blog series.If you remember, the nuts and bolts of the topic was essentially 50/50 rights to each of the two people on title.We additionally covered right of survivorship which meant if one person passed away the remaining ownership would go to the other person on title. In Severalty is simple… one person on title, 100% ownership. Tenants in Common isn’t complicated, but it isn’t cut and dry.Each situation can be custom and the amount of parties is not limited. Typically this happens in an investment situation or if one party has more money invested.
According to the Investopedia Tenants in Common “Tenancy in common is an arrangement in which two or more people have ownership interests in a property or parcel of land. The property may be commercial or residential. Each independent owner may control an equal or differing percentage of the total property. Also, the tenancy in common partner has the right to leave their share of the property to any beneficiary as a portion of their estate."
In layman terms they are the co-owners of a property. Any number of people can own the same property. So this means that two people can be tenants in common or 100 can be tenants in common. An interesting aspect of tenants in common is that ownership of a property does not have to be equal for each party. One person may own 35 percent of the property, while the other two can have 10% & 55%, or any combination totaling 100%. The owners do not need to be related. If one tenant in common passes away, the other tenants in common still own the same shares of the property that they did when the decedent was alive. The deceased tenant in common's share of the property transfers to the whomever the decedent designated in his or her will.
Which option you choose is completely up to you and the people you are purchasing real property with. You can and should consult with an attorney if you do not understand all of the ramifications of your choice. A few examples of things that could be affected are; taxes, ownership rights, write offs, rights to sell, ability refinance and so on.