Tenant-in-Common (TIC)
A Tenant-in-Common (TIC) arrangement is a form of co-ownership in which two or more individuals hold undivided fractional interests in a single piece of real property, with each owner having the right to use the entire property and to sell or transfer their interest independently.
Tenant-in-Common ownership is one of the most common forms of co-ownership in US real estate. Unlike joint tenancy, which includes a right of survivorship, a TIC interest is part of each owner's individual estate. When a co-owner dies, their TIC interest passes through their will or state intestacy laws rather than automatically transferring to the surviving co-owners.
In investment real estate, TIC structures became prominent following IRS Revenue Procedure 2002-22, which established the conditions under which a co-ownership interest in real property could qualify as like-kind property in a 1031 exchange. This ruling enabled investors to acquire fractional interests in larger commercial properties — office buildings, multifamily complexes, industrial facilities — as replacement property in a 1031 exchange, allowing them to diversify or access properties they could not afford to purchase outright.
Typical TIC arrangements involve between 2 and 35 co-owners, with each holding a specific percentage interest in the property. A co-ownership agreement governs decision-making, expense sharing, and disposition rights. Major decisions, such as selling the property or refinancing, usually require unanimous or supermajority consent, which can create complications when co-owners have divergent objectives.
The Delaware Statutory Trust (DST) largely supplanted the TIC structure for 1031 exchange replacement property after 2004 because DSTs offer more favorable management structures and clearer regulatory treatment. However, TICs remain in use for smaller transactions and partnerships where co-owners are known to each other and can agree on governance terms.
TIC interests are generally illiquid. Selling a fractional ownership stake in a commercial property is far more complex than selling a whole property, and finding a buyer willing to take a minority co-ownership position can take substantial time.