Have you been exploring the housing market in San Francisco and come across Tenancy-in-Common (TIC) properties? If so, you’re not alone. With the city’s real estate market being one of the most competitive in the nation, many homebuyers are turning to TICs as a viable alternative to traditional property ownership. The soaring property prices in San Francisco make it challenging for many buyers to secure a home on their own, and TICs offer a solution by allowing multiple individuals to share ownership of a single property.

As the real estate landscape evolves, understanding the nuances of TIC ownership becomes increasingly important. Whether you’re a first-time homebuyer or an experienced investor, comprehending what a TIC entails can significantly impact your buying decision. This guide aims to provide a clear and comprehensive overview of TICs, including their advantages, potential risks, and the legal framework that governs them.

Disclaimer: If you’re considering buying or selling a TIC property, it is essential to consult with an experienced real estate attorney. The information provided here reflects general insights and is intended for educational purposes. It is accurate as of the publication date but may change without notice. Always verify details with a qualified legal professional familiar with TIC regulations before making any decisions.

What is a Tenancy in Common (TIC)?

Tenancy-in-Common (TIC) is a form of property ownership where multiple individuals share ownership of a property, each holding a distinct, undivided share. Unlike condominiums, where owners have exclusive rights to individual units, TIC owners collectively own the entire property. Each owner’s share is defined as a percentage of the property.

In a TIC arrangement, there is only one title deed for the entire property, but the deed lists all the co-owners. This setup means that each TIC owner has a stake in the whole building, rather than just a specific unit. The specifics of ownership, including each owner’s rights and responsibilities, are detailed in a legally binding TIC agreement.

Why Are TICs Popular in San Francisco?

San Francisco’s housing market is known for its high prices and competitive nature. TICs have become a popular choice for several reasons:

1. Affordability: TICs generally cost less than condos, often by 10-20%. This affordability is due to several factors, including the complexity of shared ownership and limited financing options.
2. Flexibility: Ownership in a TIC is divided into shares, which can be bought or sold at market value. This flexibility can be advantageous if you want to sell your share or purchase another unit.
3. Investment Potential: Some buyers see TICs as a stepping stone towards condo ownership. While converting a TIC to a condo can be a complex and lengthy process, successful conversions can significantly increase the property’s value.

What Should a TIC Agreement Include?

A TIC agreement is a crucial document that outlines the rights and responsibilities of each owner. Key elements should include:

• Ownership Shares: Defines each owner’s percentage interest in the property.
• Management Duties: Details the management and maintenance responsibilities for the property.
• Financial Obligations: Specifies how costs like property taxes and maintenance expenses will be divided.
• Dispute Resolution: Provides a framework for resolving conflicts among owners.
• Transfer of Ownership: Sets terms for buying or selling shares, including any necessary approvals from other owners.

Are There Risks to Owning a TIC in San Francisco?

While TICs offer benefits, they also come with risks:

• Financing Challenges: Securing a loan for a TIC can be more difficult than for a condo, with fewer lenders offering TIC financing and potentially higher interest rates.
• Complexity of Conversion: Converting a TIC to a condo involves a complex process with no guaranteed outcome. It requires meeting various legal and financial criteria.
• Shared Decision-Making: Since TIC owners must make collective decisions, disputes among co-owners can impact the property’s management and enjoyment.

What Laws Affect TICs in San Francisco?

Several important laws and regulations play a significant role in shaping the ownership, management, and legal standing of Tenancy-In-Common (TIC) properties in San Francisco. These rules address various aspects, including how TIC agreements are structured, the rights and responsibilities of co-owners, and the process for converting TIC properties into condominiums, all of which are crucial for prospective buyers and current owners to understand fully:

1. San Francisco TIC Conversion Ordinance: This ordinance governs the process of converting TICs into condominiums. It includes requirements related to tenant eviction history, building code compliance, and neighborhood notifications. The conversion process can be lengthy and requires adherence to specific guidelines.
2. California Tenancy-in-Common Law: State law provides a framework for TIC agreements and ownership rights. It governs aspects such as the division of property, responsibilities of co-owners, and the legal structure of TIC ownership.
3. Rent Control Laws: TIC properties may be subject to San Francisco’s rent control laws, which limit the amount landlords can increase rent and provide protections for tenants. These laws can affect how TIC properties are managed and rented out.
4. Disclosure Requirements: Sellers of TIC properties must provide detailed disclosures about the property’s condition, ownership structure, and any potential legal issues. This transparency helps buyers make informed decisions.

How Much Does it Cost to Purchase a TIC?

The cost of purchasing a TIC varies but generally falls between $730,100 and $821,400, which is lower than the median condo price in San Francisco, around $912,700. TICs also offer potential savings on property taxes. However, financing can be more challenging, with limited loan options and potentially higher interest rates.

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

To find TIC units for sale, use popular real estate websites such as Zillow, Redfin, and Trulia. These platforms list TIC properties and provide details about pricing and features. Additionally, working with a local realtor who specializes in TICs can offer a more targeted search and valuable insights into available properties.

Purchasing a Tenancy-in-Common (TIC) in San Francisco can be an excellent option for those looking to enter the city’s high-priced real estate market. While TICs offer affordability and flexibility, they come with unique considerations and potential risks. Understanding the specifics of TIC ownership, including the importance of a well-drafted TIC agreement and the impact of local laws, is crucial to making an informed decision.

If you’re considering a TIC purchase, partnering with experienced real estate professionals and legal advisors is essential. Their expertise will help you navigate the complexities of TIC ownership, ensure compliance with relevant laws, and make a decision that aligns with your financial goals and lifestyle needs.

Ready to explore your options? Contact YourHom SF today to begin your journey towards owning a Tenancy-in-Common property in San Francisco. Our team is dedicated to providing the support and guidance you need to make the most of your real estate investment.