Tenancy in common is a co-ownership structure under which multiple investors pool their funds to own one entire property. Each investor owns an undivided fractional interest in an entire property and participates in a proportionate share of the net income, tax shelters, and growth. Each owner receives a separate property deed and title insurance for their percentage interest in the property, and has all the same rights and privileges as a single (fee simple) owner. Like a DST, the purchase of a TIC interest is treated as a direct interest in real estate, qualifying as “like kind” real estate for 1031 exchange. However, because each TIC investor holds title, there may be the need to sign “carve-outs” related to investor fraud and environmental issues.
Traditionally, TIC offerings came with pre-arranged non-recourse financing similar to DSTs. However, due to stricter underwriting standards, the recent trend has been to limit TIC offerings to all cash offerings with no mortgage debt.
Finally, while the investor has deeded title to the property, which would normally open up their personal assets to liability for the property owned in common, TIC investors typically set up Limited Liability Corporations (LLCs) for the purpose of TIC ownership, making them bankruptcy remote.