Tenancy in Common (TIC) is a co-ownership structure in which investors pool their funds to own an entire property. Each investor owns an undivided fractional interest 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 interest in the property, and each has all the same rights and privileges as a single 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, stricter underwriting standards have resulted in the recent trend to limit TIC offerings to all-cash transactions 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 LLCs, making them bankruptcy-remote.