When you buy property with other people, there are really two questions to answer:
How will you legally own the property?
And:
What rules will govern how you own it together?
Those aren't quite the same thing.
Your legal ownership structure determines who holds title to the property and what each person legally owns. Your co-ownership agreement establishes the rules for how the owners operate together, including things like expenses, decisions, property use, repairs, ownership changes, and eventually selling.
Joynt supports two approaches to shared property ownership:
An LLC with a Joynt Operating Agreement
or
Tenancy in Common (TIC) with a Joynt co-ownership agreement.
The appropriate structure can depend on the property, financing, intended use, state law, taxes, insurance, and the circumstances of the individual owners. Joynt helps you understand and establish the structure you're using, but doesn't recommend one structure as the right choice for every group.
Option 1: Owning Through an LLCThe LLC owns the property, and each owner holds a Membership Interest in the LLC.
With an LLC structure, the property is owned by a limited liability company created for the property.
The individual owners hold Membership Interests in that LLC, and the Joynt Operating Agreement establishes the rules governing the LLC, its members, and the property.
From the Joynt Operating Agreement
“[COMPANY NAME PLACEHOLDER LLC] (the ‘Company’) adopts this Agreement to govern the operation of the Company and the affairs of the Members with regard to the Company and the Property.”
The agreement later defines the LLC's purpose:
“The Company is a member-managed limited liability company. The Company’s purpose is to own, maintain and preserve the Property and the Company Personal Property.”
In simpler terms:
The LLC owns the property. Each owner holds a Membership Interest in the LLC. The Joynt Operating Agreement establishes how the owners and LLC operate together.
Why might a group consider an LLC?
An LLC provides a dedicated legal entity through which the property can be owned and managed.
But forming the LLC is only part of the structure.
The Operating Agreement is what establishes many of the rules for how the owners will operate the LLC and share the property.
Joynt's Operating Agreement addresses areas including:
- ownership percentages
- allocation of property expenses
- responsibility for shared debt
- budgets and assessments
- property accounts
- voting and decision-making
- property usage
- rentals
- maintenance and repairs
- use rules
- transferring ownership
- defaults
- selling an owner's Membership Interest
- selling the entire property
- dispute resolution
So the LLC establishes the legal entity that owns the property, while the Operating Agreement establishes the rules for how that entity and its owners function together.
How ownership works inside the Joynt LLC.
Joynt's Operating Agreement divides ownership into Membership Interests.
Each Membership Interest carries specific rights and responsibilities.
From the Joynt Operating Agreement
“‘Membership Interest’ means a discrete set of rights and duties as defined in this Agreement, including a right to vote and a right to use the Property, and the duty to pay certain expenses and adhere to certain rules.”
Each Membership Interest also has a Percentage Interest.
The agreement defines Percentage Interest as:
“‘Percentage Interest’ means the percentage governing the allocation of certain expenses among the Membership Interests as shown on Exhibit A.”
That Percentage Interest is then used throughout the agreement to determine certain financial obligations, voting power, property usage, and distributions.
So ownership isn't simply documented on an LLC filing. The Operating Agreement connects each owner's Membership Interest to defined rights and responsibilities around the property.
The Joynt Operating Agreement connects the legal agreement to how you actually manage the property.
One of the important differences with Joynt is that the Operating Agreement isn't designed to simply sit in a folder after everyone signs it.
Many of its processes are designed to work through the Joynt platform.
For example, the agreement provides:
“Except as otherwise provided in this Agreement, all Member decisions shall be made using the voting system provided and administered pursuant to the Joynt Service Agreement.”
The agreement also provides:
“Joynt shall provide a system (the ‘Usage Allocation System’) for allocating, reserving and assigning use periods.”
And required notices can be delivered through Joynt:
“Notice to a Party may be given via the Joynt app.”
That means the legal agreement and the ongoing management of the property are designed to work together.
Your ownership percentages, financial responsibilities, voting rights, property use, transfers, and other rules don't have to live only in a legal document. Joynt helps your group manage the property using the structure established in the agreement.
The LLC agreement can separate ownership percentage from responsibility for shared debt.
Owners don't necessarily have to structure every financial responsibility in exactly the same proportion.
Joynt's Operating Agreement distinguishes between an owner's Percentage Interest and their Shared Debt Percentage.
From the Joynt Operating Agreement
“If there is a Company Mortgage, the obligation to service and repay the Company Mortgage shall be allocated according to Shared Debt Percentages. The Shared Debt Percentages may be different from the Percentage Interests…”
In simpler terms, the agreement can distinguish between:
-
an owner's Percentage Interest
and
-
their responsibility for servicing and repaying a loan secured by the property through the LLC structure.
It’s important to distinguish the agreement between the owners from the agreement with your lender.
Shared Debt Percentage determines how responsibility for a loan secured by the property is allocated among the owners under the Joynt Operating Agreement. It does not change the obligations created by the loan documents.
Depending on the financing, a lender may require individual owners or LLC members to assume additional or personal responsibility for the loan. Your group’s obligations to the lender are determined by the loan documents, regardless of how responsibility is allocated internally under the Operating Agreement.
Once the financing arrangement is established, the Joynt Operating Agreement provides a way to document different Shared Debt Percentages among the owners.
The LLC agreement also establishes rules for when ownership changes.
Shared ownership may change over time.
Someone may want to sell. A new owner may join. An owner's family circumstances may change. An owner may die. Someone may default. Or the group may eventually decide to sell the entire property.
Joynt's Operating Agreement establishes processes for many of these situations.
For example, someone acquiring a Membership Interest doesn't automatically receive all of the benefits associated with that interest without agreeing to the obligations that come with it.
From the Joynt Operating Agreement
“No person shall have a right to enjoy the benefits of owning a Membership Interest unless and until such person…has…signed a completed Assumption of Obligations and, by doing so, explicitly agreed, or reaffirmed their commitment, to be bound by each term and condition of this Agreement…”
The agreement also contains procedures involving purchase rights for existing owners, review of certain prospective new owners, transfers, defaults, and the eventual sale of the entire property.
Instead of figuring out how an ownership change should work when it happens, the group starts with a process already in place.
What about liability with an LLC?
Joynt's Operating Agreement addresses the liability of members, but it's important not to interpret the LLC structure as a guarantee against personal liability in every situation.
The agreement provides:
“Except as expressly set forth in this Agreement, or required by law, no Member shall be personally liable for any debt, obligation, or liability of the Company, whether that liability or obligation arises in contract, tort, or otherwise.”
It also makes clear that owners remain responsible for the obligations they've agreed to:
“…it is expressly intended that the Members be responsible to the Company for costs and expenses associated with the Property as provided in this Agreement, and nothing in this Agreement or applicable law shall be interpreted to relieve any Member or Party from the obligations imposed by this Agreement.”
So the Operating Agreement establishes the LLC as the property owner and defines the rights and responsibilities of its members, while preserving the obligations each owner has agreed to under the agreement.
The effectiveness and limits of LLC liability protections can also depend on applicable law and the circumstances involved, so the existence of an LLC should not be understood as eliminating every possibility of personal liability.
Option 2: Tenancy in Common (TIC)With a TIC, the individual owners generally hold ownership interests in the real estate directly.
Tenancy in Common uses a different ownership structure.
Rather than an LLC owning the property, the individual co-owners generally hold title to the property as tenants in common.
Each owner can hold a different percentage interest.
For example:
Alex — 50%
Jordan — 30%
Sam — 20%
Those percentages represent ownership interests in the property as a whole rather than dividing the home into specific physical areas.
Because the owners generally hold title directly, there isn't an LLC between the individual owners and the real estate.
A TIC still needs rules for owning together.
Having everyone's ownership interests reflected on title doesn't answer most of the practical questions that come with sharing a property.
For example:
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Who pays which expenses?
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How are decisions made?
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How will everyone use the property?
-
What happens when someone wants to sell?
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What happens when the ownership group changes?
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How are disagreements handled?
That's why Joynt also offers a co-ownership agreement designed for TIC ownership.
It serves a similar overall purpose to an LLC Operating Agreement by establishing rules around owning property together, but it is designed around owners who hold interests in the real estate directly rather than through Membership Interests in an LLC.
The LLC Operating Agreement and TIC agreement are different legal documents built for different ownership structures.
A TIC can also come with different rights when an owner wants out.
Because TIC owners generally hold interests in the real estate directly, TIC ownership can come with rights and remedies that differ from LLC ownership.
One important consideration is partition, a legal process through which a co-owner may be able to ask a court to divide or order the sale of jointly owned property.
A TIC co-ownership agreement can address how the owners handle situations involving an owner who wants to leave, including the processes and contractual rights that apply before a dispute reaches that point.
This is one reason the co-ownership agreement is especially important with direct TIC ownership: title establishes who owns the property, while the agreement establishes how the owners have agreed to handle changes and disagreements.
Why might a group consider a TIC?
Direct ownership through a TIC may be worth discussing when it better fits the group's purchase, financing, or ownership circumstances.
Financing can be particularly important when making this decision.
Some lenders or loan programs may have requirements about how borrowers take title. Before deciding how the property will be owned, your group should confirm with the lender that the proposed ownership structure is compatible with the financing being considered.
A group's legal, tax, title, and insurance professionals can also help identify considerations specific to the property and individual owners.
LLC vs. TIC at a glance
| LLC | Tenancy in Common | |
|---|---|---|
| Who owns the real estate? | The LLC | The individual co-owners |
| What does each owner hold? | A Membership Interest in the LLC | An ownership interest in the property |
| Can ownership percentages differ? | Yes | Yes |
| Is an LLC created? | Yes | No LLC is required for TIC ownership |
| What establishes the group's rules? | Joynt Operating Agreement | Joynt TIC co-ownership agreement |
| Can financing affect the structure? | Yes | Yes |
| Does Joynt support the structure? | Yes | Yes |
What should we consider when choosing a structure?
Start with the property, financing, and your group's circumstances.
There isn't one ownership structure that's automatically appropriate for every group.
Some of the questions to consider include:
How will the property be financed?
Your lender may have requirements concerning the borrowers, ownership structure, or how title is held.
Confirm those requirements before establishing a structure around financing that hasn't yet been approved.
What are the tax and reporting considerations?
LLC and TIC ownership can involve different tax and reporting considerations.
How the property is used, how ownership is structured, how expenses and income are allocated, and the tax treatment available to the ownership group can all affect how the property and its owners report taxes.
For Joynt’s LLC structure, the Operating Agreement provides for tax professionals to determine applicable LLC tax calculations and reporting. It also makes clear that each owner remains individually responsible for their own tax reporting.
From the Joynt Operating Agreement
“Each Member is individually responsible for how they report the operating and tax consequences of Company participation on their tax returns and shall consult with their own advisors regarding such reporting…”
Because tax treatment depends on the property and the individual owners’ circumstances, your group should review the proposed ownership structure with a qualified tax professional rather than choosing between an LLC and TIC based on a general tax assumption.
How will the property be insured?
The ownership structure and the way the property will be used should also be reflected in the property’s insurance coverage.
Changing how a property is titled can affect how the property needs to be insured. Before establishing or changing an ownership structure, your group should tell its insurance professional exactly how title will be held and how the property will be used, and confirm that the policy appropriately covers the property and applicable owners or entity.
For properties using Joynt’s LLC structure, the Operating Agreement requires the LLC to maintain property and general liability insurance meeting the requirements established in the agreement.
From the Joynt Operating Agreement
“The Company shall at all times maintain…a policy of fire and casualty insurance covering the Property…and…a policy of general liability insurance…”
How will the property be used?
A primary residence, second home, vacation property, or investment property can raise different financing, insurance, tax, and legal considerations.
How does your group want to hold ownership?
With an LLC, the LLC owns the property and the owners hold Membership Interests in the LLC.
With a TIC, the individual owners generally hold their ownership interests in the real estate directly.
How will ownership be divided?
Both structures can accommodate different ownership percentages, but those interests need to be properly established and documented.
What happens when life changes?
Whichever structure you use, a strong co-ownership agreement can establish processes for situations such as ownership changes, expenses, decisions, property use, disputes, and eventually selling.
When should we establish the legal structure?
Your ownership structure should be addressed as part of the purchase and closing process.
The structure determines something fundamental:
-
Who will own the property
If an LLC will own the property, the purchase, financing, title, insurance, and legal documentation may need to reflect that structure.
If the owners will hold the property directly as tenants in common, the purchase and closing documents need to reflect that structure instead.
Because financing and title requirements can vary, your group should confirm the intended structure with the appropriate professionals before closing.
What if we already own the property?
You may still be able to establish a more formal co-ownership structure or agreement, but changing the way an existing property is owned can be different from establishing the structure before a purchase.
For example, moving a property that's already individually owned into an LLC would involve changing how title is held.
That can raise questions involving:
- an existing mortgage
- lender requirements or consent
- title
- taxes
- insurance
- state and local requirements
Those implications should be reviewed before changing title. In particular, your group should confirm with the existing lender whether a title change is permitted, ask the insurance provider whether coverage needs to be updated, and review potential tax and title consequences with the appropriate professionals before transferring the property.
The Joynt LLC Operating Agreement contains detailed rules governing later transfers of Membership Interests once the LLC ownership structure is in place, but those provisions do not determine whether an existing individually owned property can initially be transferred into an LLC.
If you already own the property, Joynt can help establish the co-ownership framework, while your lender and applicable legal, tax, title, and insurance professionals can help determine what changes to the existing ownership structure are appropriate.
The ownership structure is only part of the picture.
Whether your group uses an LLC or TIC, establishing who legally owns the property doesn't answer every question that comes with owning it together.
You still need a plan for:
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Who pays?
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Who decides?
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How is the property shared?
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What happens when someone wants out?
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What happens when someone doesn't meet their obligations?
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What happens when the ownership group changes?
That's where the co-ownership agreement becomes important.
With an LLC, the Joynt Operating Agreement establishes those rules around the LLC and its Membership Interests.
With a TIC, the Joynt TIC co-ownership agreement establishes rules appropriate to direct co-ownership of the property.
The legal structure establishes how the property is owned. The agreement establishes how you own it together.
Joynt helps you put a clear structure around owning together.
You shouldn't have to become an expert in LLCs, TICs, title, operating agreements, and shared-property rules just to understand how owning together works.
Joynt helps your group understand and document your ownership structure, establish everyone's interests and responsibilities, and put an agreement in place designed specifically for shared property ownership.
With Joynt Pro, those rules can also connect to how your group manages money, makes decisions, shares the property, and handles changes over time.
Clear ownership. Clear rules. A plan for what happens next.
This FAQ provides general educational information and isn't a recommendation that a particular legal structure is appropriate for you. The appropriate ownership structure can depend on the property, applicable law, financing, taxes, insurance, and the circumstances of the individual owners. Before selecting or changing an ownership structure, your group should confirm applicable requirements with your lender and appropriate legal, tax, title, and insurance professionals.
