Although it's fairly uncommon, individuals or businesses sometimes choose to own commercial property as tenants in common, with no survivorship rights. Although there are some tax benefits associated with such an ownership structure (including, but not limited to, those related to 1031 exchanges), various pitfalls are presented under state real estate law which the owners should be aware of.
Tenancy in common is roughly defined as the holding of ownership in land by several persons through distinct titles with a "unity of possession". In other words, all owners have a simultaneous right to possession of the entire property in the absence of an agreement between the parties (and sometimes in spite of it). Questions often arise as to whether one co-tenant, who exercises this right of possession, owes anything to other co-tenants who are not in possession. This untethered right of possession is just one of the pitfalls inherent in this type of ownership.
Equal concerns are presented by the risk of both attachments and conveyances. First, any owner's interest may be attached or seized by a judgment creditor of that owner. Once that interest is seized, the other owners are now essentially "in business" with the former owner's creditor which can obviously be disruptive. Lastly, each owner has the right to freely convey his interest in the property, whether voluntarily or upon death. The existing owners may or may not get along with the new transferee owner.
Based upon the foregoing, at the very least, if one chooses to own an interest in commercial real estate through a tenancy in common arrangement, he or she should make sure that there is a tenancy in common agreement dealing with the types of issues normally addressed in the organizational documents of a business entity, such as management and buy-sell rights.
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