What is a TIC? An Explanation of the San Francisco Tenancy In Common

TIC is an acronym for Tenancy In Common (also known as Tenants in Common) and the Brown & Co Group is well known throughout San Francisco for our expertise in the field. After decades of representing Sellers we have often found ourselves explaining to potential buyers, and even their real estate agents, what a TIC is.

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, and 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 governs 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, largely 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 monthly payment of the loan 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 greatly improves the liquidity of the TIC interest. We have assisted with the conversion from group to fractional loans for many properties in order help increase our clients’ selling price.

Around 2005, with input from leaders in the TIC market including Brown & Co. and Andy Sirkin Law, the fractional loan product came into existence. With this type of financing, there is a separate loan for each co-owner. Each loan is secured only by the related individual interest. This eliminates the need for the co-owners to refinance if a unit sells. From the perspective of the buyer, the process to obtain financing is very similar to that of obtaining a loan for a condominium.

Over the years the number of fractional lenders has increased. Today there are 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 and 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 greatly benefit from working with an experienced real estate team. HOA health, rental options, soft story issues, and eligibility for condominium conversion are just a few items to be aware of when buying or selling a TIC. If you have questions or comments, please share them below. 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.