Tenancy in common has long been one of the three types of joint ownership in real property recognized by North Carolina. Until recently, it was governed by common law principles and not codified by statute. However, on September 9, 2024, Article 7 of Chapter 41 of the North Carolina General Statutes was officially signed into law to clarify and consolidate the general principles of tenancy in common.
This is good news for attorneys and the public, as tenancy in common, pun very much intended, is quite common. It is the default form of ownership when two or more individuals jointly own real property. By contrast, tenancy by the entirety is reserved for married couples, and joint tenancy with rights of survivorship must be explicitly stated in a conveyance.
As an estate planning and probate attorney, I frequently encounter tenancy in common when children inherit real property from their parents, whether by will or through intestate succession. Accordingly, it is critical that siblings understand the principles of tenancy in common.
In this blog, I will review the primary principles of tenancy in common that have now been codified in Article 7 of Chapter 41.
Nature and Creation of Tenancy in Common
The key to understanding tenancy in common is recognizing that each cotenant owns a distinct, severable, and undivided interest in the property. Each cotenant has the right to possess the entire property, regardless of the size of their interest. For example, if one person owns a 99% interest in a house and lot and another owns a 1% interest, the 1% owner still has the right to occupy and use the entire property.
Tenants in common do not have a right of survivorship. Therefore, each cotenant may dispose of their interest by will. If a cotenant dies without a will, their interest passes through intestate succession.
Tenancy in common can be created by an instrument, such as a deed to two or more individuals, that either expresses that the individuals hold separate undivided interests or does not, under the circumstances, create any other type of estate (such as a tenancy by the entirety or joint tenancy with right of survivorship). In other words, it is the default form of ownership.
Generally, a conveyance by deed to two or more individuals is presumed to give each an equal interest, unless the deed provides otherwise. However, there is a catch: if a parcel is conveyed to three individuals, and two of them are married, the married couple is treated as one cotenant and take their share as tenants by the entirety. Accordingly, the married couple would hold a one-half undivided interest, and the third individual would hold the other one-half undivided interest.
Rights and Responsibilities of Cotenants
As noted, each cotenant has the right to enter, occupy, and use the property, subject to the equal rights of the others. The possession of one cotenant is legally considered the possession of all. Unless an “actual ouster” occurs, a cotenant cannot bring an action against another for possession.
An actual ouster, as defined in N.C.G.S. § 41-80, is an entry or possession by a cotenant that constitutes a clear, positive, and unequivocal act, equivalent to an open denial of another cotenant’s rights or title and a displacement of their legal possession (seizin).
Cotenants share proportionally in any rents and profits generated by the property. If one cotenant receives more than their share, another cotenant may bring an accounting action to recover the difference.
A cotenant who makes necessary repairs is also entitled to contribution from the other cotenant unless the repairs were made during a period when the cotenant had exclusive possession, or they are entitled to offset the costs through rents and profits in a partition or accounting action.
Cotenants also share proportionally in expenses, including property taxes. A cotenant who pays more than their share of taxes is entitled to reimbursement, except for periods when that cotenant had exclusive possession. There is a separate statutory provision on tax matters: N.C.G.S. § 105-363. It provides two key rules: (1) If one cotenant pays only their proportionate share of the taxes, their share is exempt from a tax lien against the property; and (2) if one cotenant pays the entire tax bill, they are entitled to a lien against the other cotenants’ shares for the amount paid on their behalf.
These issues of rents, profits, and expenses are where the percentage of ownership matters with cotenancy. Returning to the earlier example, if one cotenant owns 99% and the other 1%, then the 1% owner has an equal right to possess the property but is only entitled to 1% of the income and responsible for 1% of the costs. So, for $1,000 monthly rent, the 1% cotenant’s share is only $10. Likewise, for a $1,000 annual tax bill, they owe only $10.
It’s important to note that these rights and responsibilities are default rules, and under N.C.G.S. § 41-78, they may be modified by agreement. If cotenants intend to maintain joint ownership long-term, a joint ownership or venture agreement is essential to prevent disputes and litigation.
While tenancy in common is governed by clear legal principles, enforcing those rights is often challenging. In many cases, the best recommendation is to terminate the tenancy in common, either through a buyout by one cotenant or a sale to a third party.
Conclusion
Tenancy in common is a long-recognized form of real property ownership in North Carolina. Fortunately, the principles governing it have now been codified and clarified in Article 7 of Chapter 41 of the North Carolina General Statutes.
Despite the statutory framework, practical issues often arise. In many cases, the best course of action is for cotenants to negotiate a buyout or sell the property. If you need assistance in navigating or exiting a tenancy in common arrangement, contact our office to schedule a consultation.
About the Author
Andrew M. Brower is a Board Certified Specialist in Estate Planning and Probate Law at Law Firm Carolinas.