Residential Tenancy in Common
for San Diego
A Premier San Diego Real Estate & Mortgage Company
Prestige Properties & Finance
San Diego Homes & Foreclosures

A Tenancy in Common (“TIC”) is a legal way of holding a separate and distinct interest in real property with others who also hold a
separate and distinct interest in the same real property.

TIC Exclusive Use Agreement is a legally binding agreement between the different owners of a property. It assigns portions of the
multi-unit property into exclusive use areas, such as a unit, yard area, and parking for each TIC co-owner. A memorandum of TIC
Exclusive Use Agreement is recorded against the title of the property. When you sell your TIC interest, you are selling your specific
interest in the property which comes with the exclusive use buildings, units, and/or areas specified in the TIC Exclusive Use Agreement.

Residential Tenancy in Common (TIC's), where a multi unit property's is sold to individual buyers, unit by unit, much like a
condominium conversion, started about 25 years ago in San Francisco. With severe building restrictions for both new condominium
construction projects, limited land, and limits of the number of units that could be converted to condos each year the supply of "for sale"
housing has been limited for decades. 25 years ago multi unit owners and developers a like began converting multi unit properties to  
Tenancy in Common ownership structures so they could sell the units to individual buyers.

Now, 25 years and 1,000's of TIC sales later, TIC units are on every buyer's list when searching for a home to buy in the Bay Area. San
Francisco now brings to market more TIC units each year than condominium units. There are
100's of individual TIC unit sales in the last
180 days, and over a 100 active
San Francisco TIC Listings on the MLS.  Some home loan lenders will even lend up to 80% of the purchase
price for TIC unit buyers in the Bay Area:
Guarentee Mortgage, Sterling Bank, NCB.  

La Jolla also has limited land area, and restrictive city and coastal commission condominium conversion guidelines making it an ideal
location for TIC properties. Although there is no individual TIC unit financing available like San Francisco, over 40% of La Jolla
purchasers use all cash anyways.

TIC Ownership Structure. Investors worldwide are familiar with “TIC” properties and investments for commercial properties. They buy
and sell their % interests in commercial projects on a daily basis, basically selling the income and future appreciation that goes along
with their percentage of ownership. The only difference for a residential TIC are the paragraphs in the TIC Exclusive Use Agreement that
divides the exclusive use areas of the property up between the owners.

California Law & TIC’s
California law is very clear on “Tenancy in Common’s” with the courts even ruling that they are not actual "subdivisions" as referred to
in "The Subdivision Map Act" and therefore, none of the division of ownership and exclusive usage rights fall under the jurisdiction of
local zoning boards or coastal commission, or are subject to their often burdensome requirements for converting multi-family property to
condominiums. Multiple people or entities owning a single multi-family property who have decided to own it as tenants in common
and legally separate the interests with a binding "Exclusive Use Tenancy in Common Agreement" are not governed by the Subdivision
Map Act.

What Do You Own in a TIC?
You own a percentage of the whole property and the exclusive rights to a specific unit and any parking or yard areas that come with it.

A common approach to compute the percentage of ownership when all units are not identical is to value each unit as if it were a
condominium using recent sale prices for comparable condominium units as a basis for the valuation. Once the condominium values are
established, they are added together and each is divided into the total to yield the percentages.  

Are Tax Benefits the Same as Other Residential Real Estate?
Yes. Owners who reside in the property can deduct their mortgage interest and property taxes, and often may avoid capital gains tax on
resale. Owner who rent out their premises can declare their income and expenses, including depreciation, and may undertake a tax-
deferred exchange.

How are Obligations Allocated Among Owners?
Just like a condominium property common area expenses are paid through an HOA fee to an HOA management company . These
obligations include insurance, landscaping, and other common area maintenance items just like a condominium property does.  

How is the Decision Making Process Distributed?
In most Agreements, each owner has one vote.  Or, the vote can depend upon the monetary value based upon the percentage of
ownership (e.g. 50% of the ownership value of the TIC gets to vote 50% of the voting shares.) Usually, routine decisions are made by a
majority. Major items such as expensive non-emergency repairs or improvements generally require unanimity or a super majority (e.g.
75% approval.)

TIC Agreement-Similar to HOA CC&Rs?
Each Agreement can vary based on the unique needs and desires of the Owners or of the person first converting a property into a TIC
building, but much like a condo HOA certain common provisions almost always exist.

A  TIC Agreement should always include at the minimum:

        Separation of the property into "individual” and "group" components relating to usage rights and maintenance responsibilities
        Rules governing property usage (e.g. pets, noise, floor covering) including enforcement provisions
        Description of the owners' financial obligations including reserve accounts, taxes, common area maintenance and other expenses
        Formulas for determining each owner’s monthly payment in advance
        Management of the property, including accounts receivable, accounts payable, regular reporting maintenance and janitorial
        Meeting and decision making procedures
        Policy in the event of death or bankruptcy of an owner
        Sale of individual interests
        Dispute Resolution: Non-judicial using mediation and private arbitration to avoid and high expense of legal battles in Court

Can a TIC Owner Sell Their Unit?
One important function of an exclusive use TIC Agreement is to allow parties to sell independent of one another, like a home or
condominium owner can, and to realize the increase in value, if any, in their interest.  For example, if one owner remodels his/her
kitchen, when they sell, the value of such remodel will be realized via their unit's sale price. Property taxes only increase on the  
percentage of the property that sold and all increases are allocated to the new owner.

Where Can I Find Additional Definitive Information About Buying a “TIC”?
Sirkin & Associates is an attorney in San Francisco for “Tenancy in Common” properties in California. They have written over 5,000 co-
ownership agreements for condominiums, co-op's, and tenancy in common properties over the last 25 years. Their website explains
everything from A-Z about each ownership format and will educate the least experienced real estate purchaser in less than 45 minutes on
the pro's and con's of Tenancy in Common's as compared to condominiums and homes.    Other attorney resources are
Paul Law Group
Goldstein, Gellman, Melbostad, Harris & McSparran, LLP.

Condominium versus TIC Comparison
Prestige Properties & Finance, a Real Estate & Mortgage Broker
2658 Del Mar Heights Road, Suite 207, Del Mar, CA 92014
Ph. 858-775-5427 :: Fax 858-484-3577
Licensed by the California Dept. of Real Estate. License #01153458
An equal opportunity Real Estate & Finance Company. All information deemed reliable but not guaranteed.