Understanding Tenant-in-Common (TIC) Structures

What Is a TIC?

A tenant-in-common (TIC) structure allows multiple investors to co-own undivided fractional interests in real property. Each owner holds a separate title interest and may have distinct ownership percentages.

TIC interests have historically been used within exchange frameworks as a way to acquire replacement property interests that may meet like-kind requirements.

How Ownership Works

Each tenant-in-common owner holds an undivided interest in the entire property rather than a specific unit or portion. Ownership percentages, rights, and responsibilities are typically governed by a TIC agreement.

Decisions affecting the property are generally made collectively according to the terms of the agreement and applicable law.

Potential Benefits

TIC structures may provide access to institutional-grade properties, potential diversification across assets, and the ability to acquire replacement property interests within exchange timelines.

They may also allow investors to participate in larger properties than might be feasible through direct ownership alone.

Important Considerations

TIC investments involve co-ownership risk, limited control over day-to-day decisions, illiquidity, and reliance on the performance of the underlying property and management. Fees and structural complexities may also apply.

Common Use Cases

TIC structures are often considered by investors completing exchanges who seek replacement property interests without direct management responsibilities, or who wish to diversify across multiple properties.

Frequently Asked Questions

Do TIC interests qualify for 1031 exchange treatment?

TIC interests have historically been used within exchange frameworks. Whether a specific interest qualifies depends on its structure and current guidance, and should be reviewed with tax counsel.

How is income distributed?

Distributions are generally made according to each owner's percentage interest, subject to the terms of the TIC agreement.