Tenancy in Common (TIC)

Owners of multi-unit buildings are increasingly choosing to sell TIC shares by what is called a “One at a Time” sale. This means that the owner sells individual TIC shares, well, one at a time. There are two main reasons a seller will choose a “One at a Time” sale:

As a TIC is a form of joint ownership, the decision making process for management of the property as well as the responsibilities and accountability of the co-owners is important to define in advance. Typically all decisions affecting the property are made via owner vote. Depending on the severity of a particular issue, decisions are generally made either by majority vote or by a unanimous vote. It’s important that the owners delineate which types of decision should require a majority vote and which require a unanimous vote. As a general rule, the more costly a decision will be to each owner the more likely it is that the decision should require a unanimous vote. For example, choosing a lawn service may simply require a majority vote while choosing a roofing contractor may require a unanimous vote.

Home owners insurance is a shared expense among TIC owners. Typically each co-owner contributes a monthly payment to a shared bank account from which payments are made for group expenses such as property taxes, insurance, large repairs, and maintenance.  

It is important that all TIC owners are listed on the insurance policy. A policyholder, when filing an insurance claim, must prove there was damage or loss and also show proof that the property lossed or damaged belonged to the owner. If one or more co-owners in a TIC is not listed on the insurance policy as an owner, the insurer could argue successfully that they are not entitled to compensation for any loss or damage, even though they are co-owners of the property.

Good, affordable (as relative a word as exists in San Francisco) home owners insurance can be difficult to find in California. High insurance payouts for water related damage and other disasters has made insurers even more prudent. Individuals who have filed past claims may find insurance premiums cost prohibitive or even unavailable as insurers are increasingly more aware of people with a propensity to file claims.

Converting to a TIC: How will it effect my valuation?
Converting an existing building to a TIC will likely increase the overall value of the property. The reason is that a TIC enables more buyers to access the market. This increased demand tends to drive up the price of a given unit and, collectively, the entire property. It also reduces an owners hold risk as there are simply more people in the market to buy single units than there are multi-unit buildings.

TIC’s are primarily financed in one of two ways, a common group loan or an individual tenancy in common loan. Common group loans are the most frequently used.