Tenants in common

Posted by on Sep 7, 2016 in Commercial Real Estate Tips | 0 comments

Tenants in Common

In some commercial real estate markets it is difficult to convert rental apartments due to rent controls and condo conversion laws. Innovative real estate investors have found a way to circumvent the restrictive nature of the market by utilizing tenants in common also referred to as TIC.  Tenants in common is a popular form of joint ownership which creates a hybrid type commercial real estate property.

Snapshot of Tenants in Common and how it works

Consider you have a four unit rental property that is depressed but due to rental controls an investor can not condo the property. The investor then advertises to the public for the buyer to own one of the individual units in which they sell pro-rata shares of ownership in the total building. After this is done the respective owners enter into a long term leases with “their” units with all the owners. In a legal sense all of the households jointly own the entire property, in a practical sense each person becomes the proprietor of a specific unit.  Later if one of the owners wants to sell his or her share of the building, they can do so. A new buyer will pay the seller the value of his or her share of ownership interest and then obtains leasehold rights to the property.Buyers and Title Commitment

Advantages

Besides circumventing the restrictive nature of condo conversion laws, Tenants in common provide an easy way and less costly way of owning a property. TICs don’t require the documentation and permitting that is typically required with a condo conversion. In a TIC, you are selling a building to a group of co-owners, no special laws should apply.