Understanding Tenancy in Common (TICs)

If you have been searching for a home in San Francisco, the chances are that you have run into a Tenancy in Common (TIC). At first glance, a TIC looks exactly like a condo, but it’s about 10-20% cheaper. Here is what you need to know:

Understanding Tenancy in Common (TIC)

In a TIC arrangement, you acquire a percentage ownership in an entire building rather than owning a specific unit outright. This means you share ownership of the property with other co-owners. Your right to occupy a particular unit is defined by a TIC Agreement, a legal contract among all co-owners, detailing each person's rights and responsibilities.

Pros of Buying a TIC in San Francisco

1. Affordability: TICs are typically priced 10-20% lower per square foot compared to condos, making them an attractive option for buyers seeking more affordable entry into the San Francisco real estate market.

2. Potential for Condo Conversion: Some TIC properties may qualify for conversion into condominiums, which can significantly increase property value. However, this process is complex and depends on factors like the building's size, occupancy status, and San Francisco's stringent conversion regulations.

3. Access to Desirable Neighborhoods: The lower price point of TICs can provide opportunities to purchase in more sought-after neighborhoods that might otherwise be financially out of reach.

Cons of Buying a TIC

1. Financing Challenges: Securing a mortgage for a TIC can be more difficult. Lenders may require higher down payments, and there are fewer financing options available compared to traditional condos or single-family homes.

2. Shared Responsibility: As a co-owner, you're jointly responsible for the property's maintenance, expenses, and any liabilities. This necessitates clear communication and cooperation among all owners.

3. Complex Legal Agreements: The TIC Agreement is crucial and legally binding. It's essential to thoroughly review and understand this document, preferably with legal assistance, to ensure clarity on your rights and obligations.

4. Limited Resale Market: TICs may attract a narrower pool of buyers, potentially making them harder to sell compared to condos.

5. Rent Control Implications: If you plan to rent out your TIC unit, be aware that San Francisco's rent control laws apply, which can limit rent increases and affect long-term investment returns.

Key Considerations Before Purchasing a TIC

• Due Diligence: Investigate the property's history, the TIC Agreement, and the co-owners. Understanding the dynamics and any potential issues is vital.

• Legal Counsel: Engage a real estate attorney experienced in TIC arrangements to review agreements and ensure your interests are protected.

• Future Plans: Consider your long-term intentions, such as the possibility of condo conversion or renting out the unit, and assess how they align with TIC ownership.

In summary, while TICs present a more affordable pathway into San Francisco's housing market, they come with unique complexities and risks. Comprehensive research and professional guidance are essential to navigate this type of property ownership successfully.

What Are Important Questions To Ask When Buying a TIC? 

There is an already a great article on this by Andy Sirkin’s Law Office.

https://andysirkin.com/tenancy-in-common-tic/essentials-for-buyers-and-their-realtors/buyer-checklist/