A Potential Route to Affordable Home Ownership in San Francisco

 

 

 

If you’re looking to buy in the Bay Area, but you’re having a little trouble finding something to fit your budget, there’s an alternative you may want to consider. It’s called a Tenancy in Common, which is also referred to as a TIC. It’s been around for a while, but it really started to take off in popularity around 20 years ago, especially in San Francisco. 

 

It remains a popular solution for people looking for a more affordable path to homeownership. I recently had the chance to sit down with Andy Sirkin. He’s a local expert in the field of TICs. He says he became interested in them when he and his wife began searching for their own first home.

 

 

At the time, Andy says buying a home in San Francisco was out of their budget. As an alternative, he grouped together with some other people, purchased an apartment building, and moved in. He tells me he soon started fielding a lot of requests from others, and by the late 1990s the TIC business took off.

 

As Andy explains, with a typical TIC in San Francisco, you generally have anywhere from two to 25 people who all share ownership of a property. All of the people involved are on the title. Everyone holds an ownership percentage as a tenant in common.

 

That’s different from condominiums. As Andy explains, with a condo the property is already legally divided and each unit or home has a separate title. That’s not the case with a TIC because it is undivided property. Because of this, all owners have to privately agree on where everyone lives, what they get to use, and who pays what percentage. 

 

There’s another difference. Because it’s undivided property, there aren’t regulations that keep TICs out. Not all apartment buildings can legally be divided into condos, while some others are really expensive or mandate a type of lottery system. The lack of division with a TIC keeps it out of public regulation.

 

 

While TICs have remained popular over the years, some things have changed. Andy says years ago there weren’t any financial products out there just for TICs. Instead, the owners used one shared loan. While it’s still an option, many people involved with a TIC now instead opt for a fractional loan. There aren’t as many fractional lenders out there as there used to be in the Bay Area, but the majority of TICs do still use this type of financing. There are definitely some pros and cons no matter which type of financing you choose.

 

Even though TICS have been around for a few decades now, Andy says the market is still smaller than it is with condos. Andy talked to me a little bit about the old lottery-based condo conversion system. It was suspended because of a huge backlog. When it does eventually come back, Andy says it’s only going to be for buildings with 2-4 units. Owner occupancy requirements are also going to be higher. He says once that happens, we’ll still have the two-unit lottery bypass system, so that means we’ll again have two systems in play. Buildings with 5-6 units won’t be eligible for the lottery anymore, so that should mean less competition in the lottery system moving forward.

 

I asked Andy about how the ongoing pandemic is affecting things. He tells me it isn’t having much of an impact on condo conversions, but it is on TICs. There’s a lot of vacancy in the city, so some landlords are taking their units and offering them as TIC interests. Andy says they’ve seen a big increase in TIC agreement requests and inquiries. If you have any questions about TICS or condo conversions, you can always reach out to Andy at:

 

Andy Sirkin

 

 

 

(415) 462-5925