Tenancy in Common Buy Sell Agreement: Everything You Need to Know
When two or more people own a property together as tenants in common, it`s important to have a buy sell agreement in place. The purpose of this agreement is to ensure that in the event that one owner decides to sell their share, the other owners have the right of first refusal to buy it. This can prevent the unwanted entry of a third party, and preserve the original intentions of the owners for the property.
In this article, we`ll cover everything you need to know about tenancy in common buy sell agreements to help you protect your investment.
What is a Tenancy in Common Buy Sell Agreement?
A tenancy in common buy sell agreement is a legal document that outlines the terms of purchasing and selling shares of a property between the owners who hold it in tenancy in common. It sets out the price and terms of the sale, and the right of first refusal of the remaining owners.
The agreement creates a framework for the owners to have a clear understanding of how their ownership shares in the property can be transferred in the future. It can help avoid conflicts and ensure that the ownership structure remains stable.
Why Do You Need a Tenancy in Common Buy Sell Agreement?
Without a tenancy in common buy sell agreement, you may end up with unintended co-owners of the property. One owner may sell their share to a third party, and you`ll find yourself sharing the property with someone you didn`t choose. This could create conflicts and legal issues.
Furthermore, the absence of a buy sell agreement can make it difficult for the remaining owners to buy out the share of a co-owner who wishes to sell. This can result in the property being sold to an outsider, which may be contrary to the original intentions of the owners.
A buy sell agreement can prevent these types of scenarios by providing a clear way for co-owners to sell their share to each other.
What Should be included in a Tenancy in Common Buy Sell Agreement?
A tenancy in common buy sell agreement should include the following terms:
1. Identification of the Owners: The agreement should clearly identify the owners and their respective ownership shares.
2. Right of First Refusal: The agreement should define the right of first refusal. This means that if one owner wishes to sell their share, the remaining owners have the right to buy it first.
3. Purchase Price: The agreement should specify the purchase price of the share being sold. This can be a fixed amount or determined by an appraiser.
4. Payment Terms: The payment terms should be included, such as how much is due upfront, and how the remaining balance should be paid.
5. Terms of Sale: The agreement should describe the terms of the sale, including any warranties and representations that the seller must make.
6. Closing and Transfer of Ownership: The agreement should outline the process of closing the sale and transferring ownership of the share being sold.
Conclusion
A tenancy in common buy sell agreement is essential to protect your ownership rights in a shared property. It can prevent unwanted entry of outsiders, and ensure that the ownership structure remains stable. It`s important to have a clear understanding of the terms of the agreement and to have an experienced attorney draft it to avoid legal pitfalls and conflicts.