There has been a rise in the use of the home ownership model called Tenancy In Common, or TIC, in LA. Here’s why Josh Stein-Sapir has a problem with them. Occasionally a property comes up for sale that is 10-15% BELOW market price. You think to yourself: is this too good to be true?! Unfortunately, the answer is probably YES. Often the catch is the property is a TIC – a unique type of home ownership that came to popularity in the 1980s, in which the buyer becomes a fractional (and not always equal) owner of the property as a whole. All owners in a TIC appear on title together and have the right to occupy a certain unit. Sounds simple enough, however, there are several pitfalls.
- Very few lenders will loan on a TIC, and it is likely that the only loans offered will be a riskier, such as an Adjustable Rate Mortgage.
- TICs are often compared to condos, but the reality is that they are quite different. Condo owners are financially independent from their neighbors, whereas the owners of TICs do not just become neighbors, but they enter into a financially co-dependent relationship as well . So if a co-owner in a TIC does not pay their property taxes or has a mechanics lien, the other owners are responsible for paying the shortfall.
- Unlike condos, TICs are not governed and protected by a Homeowners Association.
- An intangible drawback is the fact that many TICs are created by evicting the property’s previous renters. While renters can often seek compensation through the Ellis act, there is still a negative stigma attached. The landlord is not only evicting tenants but is also removing much needed rental units from the market
While TICs are certainly a cheaper alternative to becoming a property owner in LA, it is important to keep in mind that buying a condo offers a much more secure form of ownership, with significantly fewer liabilities. Like many things in life, with TICs, you get what you pay for.