TIC / Tenants-in-Common Ownership

Tenants-in-common (TIC) or tenancy-in-common is a co-ownership method giving sellers the opportunity to sell a property as multiple units to achieve greater profit and it gives buyers the opportunity to acquire an interest in a larger property that they otherwise could afford.

TIC is often thought of as a type of property but actuallly it is how ownership (title) is held. Any type of property can be held as TIC.

Typical TIC Ownership Scenarios

• Investors: Buyers will own the property as an investment property. Buyers do not occupy the property. It is now IRS-approved to do a 1031 tax-deferred exchange into a TIC.
• Investor/Owner-occupant: Investor(s) partner with owner-occupant(s). This is often used to help the occupant eventually own the property outright. Also known as "equity sharing." See also: Starting Out: Equity Sharing
• Owner-occupants: Buyers join together to buy and occupy a property.
• Fractional owners: Each buyer gets to use the property for a certain time period. Also known as "time share."

Examples for Sellers

• You want to diversify into other properties but don’t want to sell your entire property outright
• You want to sell your property but want the sale spread out over time
• You own an apartment building and wish to sell the individual apartments
• You own land that cannot be subdivided but you are allowed to build several houses
• You want to start a timeshare

Examples for Buyers

• You want to buy but cannot afford to purchase the entire property
• You have family or friends who are willing to help and you want to have a formal business arrangement
• You want to use a property part-time but don’t the hassles of managing it

Issues to consider

• Is the sale required to be approved? Sales meeting certain criteria must be approved by the Department of Real Estate.
• Will the financing be group or individual (fractional)?
• Will the closing be simultaneous or serial? A seller may wish to be over and done with it, or may wish to receive their proceeds over time.
• What is the exit strategy when an owner wants to sell or dies?

Misconceptions and Myths

Co-owners do not incur liablity for the debts of other owners and the owners do have the ability to decide issues regarding their property. If you hear differently, question the source. Compare TIC to owning a condo — you are not responsible for the debts of other condo owners in the neighborhood and condo owners can have a say in the running of their neighborhood throught their homeowner association.

Time and Costs

A basic equity-sharing agreement involves answering some questions, will cost approximately $1,500, and typically takes a week or two. On the other hand, taking a state-regulated offering from concept to market can take six to eight months for approvals and will cost approximately $15~20,000.

For More Information

TICs are an excellent way for sellers to maximize profit and gives buyers additional options for purchasing properties that might otherwise be out of reach. We have excellent resources for TIC sellers and buyers. For more information, contact Steve.