How the Tenants in Common (TIC) Model Works for Real Estate Investors

Last updated: November 11, 2026  ·  By Brandon Lehman, Managing Partner, West Hive Capital

Tenants in common ownership gives several investors title to one property, typically each through a separate deed. For 1031 exchange investors, that detail matters more than any other. This article goes deeper than our overview of TIC investments and our plain language guide, and it relies on the primary IRS documents. It is education only and not tax advice.

What is tenants in common ownership in real estate?

Tenants in common ownership means that two or more people each own an undivided fractional interest in the same property. Our TIC overview describes this as co ownership where shares do not have to be equal, with rental income paid in proportion to each share. In the words of Rev. Proc. 2002-22, each owner is deemed to own individually a physically undivided part of the entire parcel, with the right to share possession of the whole.

Each co owner typically takes title through a separate deed. Every owner has a proportionate share of rents, the right to transfer the interest and the right to demand partition, subject to the limits discussed below.

How does a TIC interest qualify for a 1031 exchange?

A TIC interest can qualify when the IRS treats it as a direct interest in real property rather than an interest in a business entity. Section 1031 provides that no gain or loss is recognized on an exchange of real property held for business use or investment for like kind real property, and the IRS confirms that since 2018 it applies only to real property. The statute also sets a 45 day identification period and a 180 day exchange period.

Rev. Proc. 2002-22 addresses the entity question. Its stated purpose is to specify the conditions under which the IRS will consider a ruling request that an undivided fractional interest in rental real property is not an interest in a business entity. The document sets out guidelines for ruling requests and states that they are not intended to be substantive rules.

What limits does Rev. Proc. 2002-22 describe?

The revenue procedure lists conditions that cover ownership, voting and management. Several matter most to investors:

• Title: each co owner holds title as a tenant in common under local law, directly or through a disregarded entity.
• Number: co owners are limited to no more than 35 persons, with a husband and wife treated as one person.
• Voting: the sale or disposition of the property, any lease, hiring a manager and any blanket lien negotiation require unanimous approval. For other actions, co owners may agree to be bound by those holding more than 50 percent of the interests.
• No entity: the co ownership may not file a partnership return or hold itself out as a partnership.
• Activities: co owner activities are limited to those customarily performed to maintain and repair rental property.

The procedure also requires that managers be engaged under agreements renewable at least annually, and that net revenues reach co owners within three months. Lenders may not be related to a co owner, the sponsor, the manager or a lessee.

How does a TIC compare with a DST or an LP interest?

A TIC gives direct title and voting rights, a DST gives a beneficial interest in a trust and an LP interest is an ownership share in a partnership. Realized 1031 notes that TIC investors hold a direct ownership interest while DST investors hold beneficial interests in a trust, and that DST investors have no active role in management.

The IRS addressed the DST in Rev. Rul. 2004-86. It held that a described Delaware statutory trust is classified as a trust and that a taxpayer may exchange real property for an interest in it under Section 1031 if the other requirements are met. The ruling also lists trustee powers, such as renegotiating leases or refinancing debt, that would turn the trust into a business entity. That limit is why DST investors hold less control than TIC owners.

An LP interest is an interest in a business entity, which is the treatment Rev. Proc. 2002-22 is designed to avoid for TIC arrangements. Whether any particular interest works in an exchange depends on its facts, so confirm each structure with a tax advisor.

What are the main risks of TIC ownership?

The main risks are illiquidity, the need for agreement among owners and financing constraints. Realized 1031 states that TIC interests are typically illiquid, that unanimous decisions can slow action, and that lenders have strict standards and might not accept a new owner who does not meet underwriting requirements. The same page notes that under a blanket loan, remaining co owners may have to shoulder the burden if one investor defaults.

Our understanding TIC guide also lists limited control, potential conflicts among co owners and fees as drawbacks. Our 1031 exchange page covers the exchange steps, and our acquisition playbook and investment thesis show our diligence habits.

What questions should investors ask before considering a TIC?

Investors should ask about structure, decisions, debt and exit before anything else. Useful questions include:

• How is title held, and how many co owners are there?
• Which decisions need unanimous approval, and what happens if one owner objects?
• What are the loan terms, who is liable and who is the lender?
• What are the transfer and sale rights, and who might buy my interest?
• What did the sponsor’s tax counsel conclude, and has my own advisor reviewed it?

FAQ: How Does the TIC Model Work for Real Estate Investors?

What is a TIC in real estate?
A TIC is co ownership where each investor holds an undivided fractional interest in the same property and typically takes title through a separate deed. Shares can differ in size, and each owner is entitled to a proportionate share of rents.

How many investors can be in a TIC?
Rev. Proc. 2002-22 limits the number of co owners to no more than 35 persons for purposes of its ruling guidelines, with a husband and wife treated as one person.

Is a TIC the same as a DST?
No. A TIC owner holds direct title to a fractional interest, while a DST investor holds a beneficial interest in a trust. Rev. Rul. 2004-86 addresses the DST, and each structure should be reviewed with a qualified tax advisor.

If you are a family office, co GP or accredited investor who wants to learn more about how West Hive Capital approaches neighborhood retail, connect with our team. Nothing here is tax or legal advice, so please consult a qualified tax advisor about your own situation.

About the Author

Brandon Lehman

Managing Partner, West Hive Capital

Brandon brings 20+ years of experience in retail real estate development and operations. He previously led projects with SCG West and oversaw the acquisition, renovation, and exit of Western Plaza in Rancho Palos Verdes. He focuses West Hive Capital on neighborhood strip centers in Southern California and metro Phoenix.

LinkedIn →

This article is for educational purposes only and is not an offer to sell or a solicitation of an offer to buy any security. Any offering is made only through confidential offering documents to qualified investors.