San Francisco is one of the most sought-after cities in the United States. The balance between contemporary buildings and skyscrapers, along with lovely Victorian and Edwardian houses, provides comfort to the usual urban view. In addition, the relaxing, green parks and stunning sceneries add more priceless value to the city’s charm.

But living in the city comes with a price. San Francisco is known to be one of the most expensive cities in the United States. Over the years, the real estate market has increasingly become competitive. As a result, the list price of available inventories skyrocketed, and home buyers had to look for alternatives. With prices constantly rising, finding affordable housing can be difficult, but tenancy in common offers some great opportunities for home ownership.

What is Tenancy-In-Common (TIC)?

Tenancy-in-common, or tenants-in-common, is a form of shared ownership where tenants own part of the property but not all of it. In other words, if you and your friend have a property as tenants-in-common, you are both owners of the said property, and each has ownership rights. Unlike when buying a condominium wherein unit owners own a dedicated portion of the property, TIC does not have a sole owner. Instead, the TIC group owns the entire property.

The most common TIC ownership available in the market is the condo-type building. Most people compared TIC to a condo because TICs are typically offered in the form of a unit in multi-family buildings. Take note, TICs may look like a condo, feel like a condo and even act like a condo, but TIC units are legally distinct from condominium units. This distinction affects financing availability, rental policies, inheritance rights, and several other factors.

Although ownership of TIC properties includes several individuals, there is only one title deed for the entire building. Hence no matter how many units the building has, the TIC group will receive only one (1) copy of the title deed. But rest assured that the names of all tenants-in-common involved in acquiring the TIC property are on the Title Deed. Each also owns a percentage interest in the property as a whole. Further details of ownership, such as percentage shares, members’ rights and duties, and other particulars discussed among TIC owners, are stipulated in a written and legally binding TIC agreement.

Why is Tenancy-In-Common (TIC) gaining popularity in San Francisco?

As prices for entry-level housing shoot up, investors and home buyers look for other real estate options available in the market. In fact, entry prices for single-family homes have become so high that condos and TICs offer a different alternative. This circumstance paved the way for the popularity of Tenancy-in-common properties in San Francisco. TIC allows home buyers to own a property within the city at a lesser price.

Here are some of the top practical reasons why buyers acquire TIC:

• Affordability. TIC is more affordable than condos. Typically, TIC ownership can be between 10-20% lower in price than the condo ownership due to its drawbacks in the shared ownership, lenders option and loan products.
• Flexibility. For TIC properties, ownership is divided into percentages. By law, TIC owners can buy and sell their shares at any given time for any price the market will bear. If you’re interested in selling your share of the property or purchasing another unit, it’s easy to do so with this type of ownership structure. However, the TIC agreement must stipulate that the group approves of the qualification of the purchaser. Otherwise, it will risk the overall objective of the TIC group.
• Investment Opportunity. When we buy properties, we are also considering these assets as investments. For the same reason, TIC owners often buy with the hope of converting them into condo units. But the truth is, not all TIC will undergo condo conversion, and the process can be slow and tiresome. There are also several considerations before the property is eligible for condo conversions, such as eviction history, previous lottery ticket, payment habits, and more. But if you can successfully convert your TIC to a condo unit, you increase your asset’s value by up to 10-20%, in addition to market appreciation. 

How is Tenancy-In-Common (TIC) formed and organized?

Whether you are an investor looking for another property or a future home buyer exploring other housing options, understanding how a TIC is formed and organized will significantly help your decision-making process. Remember that a TIC is shared ownership, and several people are involved in a single property. 

Below are some of the important considerations involved in forming and organizing TIC:

• Work with a competent realtor. Sure enough, you have done a series of research about TIC. The next step is finding the best property to make the most of your investment. And if you are an individual buyer, it is equally important to find and evaluate other potential homebuyers before forming or joining a TIC group. That is why it is very crucial to work with an experienced realtor. They are the ones who will group people with the same interest and match them with available properties.
• Invest in an experienced TIC lawyer. Due to the nature of TIC ownership and underlying legal proceedings, everyone has to look for an experienced TIC lawyer. Regardless if you know the tenants you will share the property with or a group of strangers brought together by the realtor, you must approach a lawyer experienced in TIC formation. The lawyer will explain vital issues associated with group ownership and help assess the advantages and disadvantages of various approaches. The lawyer will then develop an appropriate structure tailored to the requirements of the group and property and document the discussion in a written TIC Agreement. 
• Establish connections among TIC owners. Once you have become a TIC owner and have officially joined a TIC group, it’s best to connect and establish rapport among your co-owners. Whether you like them or not, everyone is legally bound by each other, and personal issues will not help maximize the asset’s value. Instead, the primary goals should be eliminating friction among TIC owners, maximizing the re-sale marketability of TIC shares, and facilitating condominium conversion. 
• Observe accountability and responsibility. Because TIC is a shared ownership, each TIC owner has individual responsibilities to fulfill. These responsibilities and accountabilities must be upheld at all times to avoid unwanted problems. Once the purchase is final, each TIC owner occupies and maintains their assigned areas. The costs of maintaining common spaces, and other building expenses, are divided equitably among the owners, according to the TIC Agreement. 

How Much Does it Cost to Purchase a TIC?

The average purchase price of a TIC is between $730,100 and $821,400 compared to the median condo price in San Francisco at $912,700. In addition, TIC owners only pay 10-20% less in property tax, so there is a considerable price difference and cost savings between the two properties. Though the property is affordable, the challenge among interested TIC buyers is financing. Currently, only a few banks are offering fractional loans resulting in a higher interest rate and monthly payment.

Moreover, each resident’s percentages are not necessarily evenly split; the TIC agreement will determine how much each participant owns.

Where Can I Find Available TIC Units for Sale in San Francisco?

If you are looking for TIC units for sale in your area, Google is your ultimate friend. But for a more streamlined and real estate focused, you can search for TICs in San Francisco on the MLS listings and Trulia. You can also search for TICs on Zillow, Redfin, and other websites that list foreclosed home sales. But the most secure, well-informed way of finding TIC units for sale is reaching out to your local realtors.

We hope this article has given you a better understanding of tenancy-in-common and what it means for your San Francisco home. Indeed, TIC is an unconventional way of owning a property and is practiced only in San Francisco and parts of LA. But just like any other property, TIC is legally recognized and has its unique structure and policies, financing options, and associated risks and benefits. It can be overwhelming to keep track of all the processes and legalities involved. But with a good realtor and an experienced lawyer, you will be able to come up with a highly objective decision. 

While we are on the subject of processes and legalities, did you know that your future TIC property is governed only by a sole document known as TIC Agreement? It is similar to a contract where all important details, processes, and responsibilities regarding your property are stipulated! Make sure to learn more about the TIC agreement’s importance, risks, and how it shapes ownership of your property.

Disclaimer: If you’re looking to buy or sell a TIC property, we recommend contacting an experienced real estate attorney who can guide you through the process. The information provided above reflects real estate broker insights and should be considered a resource for home buyers and sellers and educational purposes. In addition, the information provided is deemed reliable only at the time of publication and is subject to change without any prior notice. Thus, San Francisco home buyers should always seek the counsel of qualified professionals, including attorneys, wealth managers, and municipal authorities, before deciding to purchase or lease real property.