Selling or Buying Out a Tenant in Common
Tenants in common is the optimal conveyance for parties who desire common possession of the land but not the right of survivorship. With tenants in common each individual gains full right of the premises regardless of the size of their share. Lastly, a “tenants” interest in the property can be sold without affecting anyone else’s right. Tenants in common is a popular method of titling in estate planning as the ownership interest of the person who passes is to his or her heirs either through probate or an estate plan.
How are Tenant in Common Interests Transferred?
A tenant in common “TIC” can transfer interest in a tenancy in common to another buyer or to an heir -- via a will, lady bird deed, or trust arrangement. A co-tenant can also sell or mortgage his/her share in the property. Selling a TIC interest to a third party at arm’s length can be very difficult as few buyers will want to share in interest with others that they do not know.
What to do if You Want to Sell To or Buy Out other TIC owners?
For an example let’s say two brothers A and B each own a 50% interest in their childhood home as tenants in common after their parents passed. brother B would like to own the home outright as he is concerned that brothers A's children may get an interest in the home after brother A passes and they may mismanage.
Brother B has a couple of options. The first option would be to buy out Brother A which is a good option and the second option would be requesting a partition from the court. The second option should be avoided if possible.
Buying out another TIC interest is similar to the process of buying a house. This would include evaluating the market price for the property and then applying this to the purchase price. For the above example if the home appraised for $200,000, brother A’s interest would be $100,000 and should expect that amount from Brother B.
Once a purchase price is agreed upon, the brothers would then move into the process of creating a purchase agreement, then moving into the arrangement and documents for the closing process. At closing brother A’s interest will be deeded over to brother B who will not have 100% of the home.
How Can an Attorney Help?
Selling or buying out a tenant in common interest is a complex process with lots of paperwork and legal complexities. If a TIC has chosen to sell independently, an experience real estate attorney can provide you with as little or as much legal support as you need to complete your for-sale-by-owner transaction.
At Matt Devitt Law, PLC our main concern is helping you complete the transaction appropriately and minimize any liabilities in the future through negotiation, litigation, or alternative dispute resolution. The law firm guides clients through essential steps in the purchase or sale of a tenant in common interest.
A bit about us – Matt Devitt Law is a full service real-estate law firm located in Livonia, MI. In addition to real-estate we also provide legal counsel for small businesses and off a full suite of estate planning services as well.
We work with our surrounding communities including Livonia, Northville, Plymouth, Novi, Farmington Hills, and beyond. Our focus is on providing pragmatic value-based solutions for your estate planning, small business, and real estate legal needs. Give Matt a call (734) 335-0713 for a free consult.