Tenants in Common (TIC)

Tenancy in common (TIC) is a form of co-ownership in which two or more investors each hold an undivided fractional interest in the same real property, with each owner holding a separate, transferable title to their share. In the 1031 exchange context, a TIC interest can qualify as like-kind replacement property because each co-owner is treated as owning a direct interest in real estate rather than an interest in a partnership or entity. The IRS set out the conditions under which a TIC arrangement will be respected as real property ownership, rather than recharacterized as a partnership, in Revenue Procedure 2002-22, which addresses factors such as the number of co-owners, unanimous-consent requirements for major decisions, and limits on management agreements. TIC structures were widely used for 1031 exchanges in the 2000s but largely gave way to the Delaware Statutory Trust after Revenue Ruling 2004-86, because DSTs avoid the unanimous-consent and lender-complexity problems that plagued TICs, which typically capped co-owners at 35 and required every owner to qualify on the loan. TIC interests can still be appropriate in certain transactions, particularly where investors want more direct control or a role in major property decisions than a DST permits, but they carry coordination, financing, and liquidity challenges that investors should weigh against the DST alternative.