Risks of Tenancy In Common

Although very popular, Tenancy In Common ownership presents a unique set of challenges that any investor should thoroughly consider beforehand. Beyond the typical risks associated with investing in real estate, when ownership involves multiple investors there is always the risk of conflict or disagreement among the owner pool.

Any major decision requires the unanimous approval of all owners, which can be problematic if fast decisions are required. While most TICs contain a buy-out provision for dissenting owners, it is usually not a fast or easy process. The time it takes to resolve disagreements among owners can often cause the TIC to miss out on lucrative selling opportunities.

Likewise, if the TIC property is mortgaged, there is also the risk that a change in an individual owner’s financial status may adversely impact any future refinancing. Unlike Delaware Statutory Trusts, when a TIC seeks financing, the lender will scrutinize the individual credit of each TIC investor.

To find out how we can help you find and close on your next 1031 exchange property or to learn more about the exchange process and our qualified intermediary services, please visit our website.