Explaining San Francisco Tenancy in Common
Tenancy In Common (also known as Tenants in Common) also goes by the acronym TIC.
You may be familiar with a Tenancy in Common as a form of property co-ownership. Each owner has an undivided interest in title to the property, often expressed as a percentage. In San Francisco, and more recently expanding into the greater Bay Area, the term TIC is used to mean a TIC dwelling unit in a building, where each owner or TIC member has certain exclusive occupancy rights. These exclusive rights are defined by a separate contract between the co-owners known as a TIC Agreement.
TICs are typically found in a multi-unit building. The TIC agreement allows a person to own a percentage of the title with exclusive rights to a particular unit and often amenities such as parking, storage, or outdoor space. This separate agreement also dictates how the co-owners will operate their homeowners’ association and details the house rules and restrictions, such as the number of pets allowed. TICs are often compared to condominiums, and the TIC Agreement is roughly the equivalent of a condo association’s “CC&Rs,” which govern the same type of usage requirements within a condo.
This arrangement is very San Franciscan, and those moving to our City are often unfamiliar with it. Started decades ago, the TIC provides an entry point to a consistently expensive market. Initially, TIC’s were less favored, mainly because the financing was often through a group loan. With all co-owners on one loan for the entire building, joint liability between owners for the loan’s monthly payment was a risk Buyers were willing to take only because there seemed few other alternatives to own San Francisco property. Liquidity was also a problem. For example, when selling a TIC interest, a new buyer could assume the current owner’s portion of the group loan. Unfortunately, in a market that often appreciates at a high rate, this would require the buyer to have a large down payment.
The good news is that while group loan TIC’s can still be found in San Francisco, most TICs are now fractionally financed. Fractional financing in practice is just like conventional financing that a Buyer would encounter in a condo purchase and dramatically improves the TIC interest liquidity.
Over the years, the number of fractional lenders has increased. Today, several major lenders in the fractional TIC market, including Sterling Bank and Trust, NCB (National Cooperative Bank), Bank of Marin, Redwood Credit Union, and Bank of San Francisco. Qualifying for a fractional TIC loan is similar to that of a conventional loan. With each lender offering varying rates and loan products, a fractional TIC buyer has many options to choose from.
The TIC market in San Francisco is very healthy, with hundreds of these properties changing hands each year. It is true today, as in the early days of TIC development, that a TIC can often provide that lower price point a first-time Buyer is looking for to get in on the property market. Values of TICs rise and fall with the market just like other property types, and Buyers and Sellers are advised to engage Realtors with experience in dealing with TIC sales.
Each TIC is different, and a buyer or seller can significantly benefit from working with an experienced real estate team. HOA health, rental options, soft-story issues, and condominium conversion eligibility are just a few items to be aware of when buying or selling a TIC. If you are looking to buy or sell a TIC, please do not hesitate to reach out to us for a personalized consultation to discuss your goals.