Re:Some young people are buying houses with friends
by wahern on Thursday March 07, 2019 @03:57AM
(#19326560)
I agree that joint ownership is absolutely something to be avoided. But there's also tenancy-in-common (TIC), which provides liability commensurate with your ownership stake. In most places TIC is an antiquated form of ownership usually only seen as the result of intestacy.
Banks typically won't issue a mortgage for a TIC title as they're not interested in becoming a tenant-in-common in the case of default, making such titles relatively unmarketable. TIC owners through inheritance almost always liquidate by selling the property as a whole or, in the case of undeveloped land, through partition.
But in San Francisco TICs have become common alternatives to condominium conversions with real estate developers. The city caps the number of yearly condominium conversions, but has little ability to control private arrangements like TICs. It's so common that many local banks will issue mortgages for TIC shares, provided the proper contractual arrangements are in place to expedite recovery from deadbeat tenants-in-common. Taking ownership of a TIC share typically involves simultaneous execution of both a title transfer from the seller and contracts with each remaining TIC owner. (These contracts also effectively partition the property, as TIC owners otherwise have a right to access the entirety of the property, including your bedroom.)
The contracts tied to TIC arrangements do increase the costs and risks of litigation. If title passes to someone who doesn't enter the shared contract--say by inheritance--then you have a problem. (Presumably TIC contracts attempt to force maintenance of Wills or Trusts to prevent this from occurring.) So while banks here will issue mortgages the property values are discounted. But that means that TIC apartments also typically sell for substantially less than comparable condominiums, which translates to a smaller mortgage, making ownership more affordable. If you see a deal too good to be true in SF, assuming its legitimate it's probably a TIC.
Condominiums are designed to simplify this whole process, but in their absence you can hack together a substantially equivalent form. Interestingly, few property lawyers outside San Francisco would think of doing this. My Property Law professor, who was also the professor for my Land Use seminar, was surprised TICs were being used this way. So if you're outside San Francisco it may pay to inquire with an SF-based real estate developer or property attorney.
Banks typically won't issue a mortgage for a TIC title as they're not interested in becoming a tenant-in-common in the case of default, making such titles relatively unmarketable. TIC owners through inheritance almost always liquidate by selling the property as a whole or, in the case of undeveloped land, through partition.
But in San Francisco TICs have become common alternatives to condominium conversions with real estate developers. The city caps the number of yearly condominium conversions, but has little ability to control private arrangements like TICs. It's so common that many local banks will issue mortgages for TIC shares, provided the proper contractual arrangements are in place to expedite recovery from deadbeat tenants-in-common. Taking ownership of a TIC share typically involves simultaneous execution of both a title transfer from the seller and contracts with each remaining TIC owner. (These contracts also effectively partition the property, as TIC owners otherwise have a right to access the entirety of the property, including your bedroom.)
The contracts tied to TIC arrangements do increase the costs and risks of litigation. If title passes to someone who doesn't enter the shared contract--say by inheritance--then you have a problem. (Presumably TIC contracts attempt to force maintenance of Wills or Trusts to prevent this from occurring.) So while banks here will issue mortgages the property values are discounted. But that means that TIC apartments also typically sell for substantially less than comparable condominiums, which translates to a smaller mortgage, making ownership more affordable. If you see a deal too good to be true in SF, assuming its legitimate it's probably a TIC.
Condominiums are designed to simplify this whole process, but in their absence you can hack together a substantially equivalent form. Interestingly, few property lawyers outside San Francisco would think of doing this. My Property Law professor, who was also the professor for my Land Use seminar, was surprised TICs were being used this way. So if you're outside San Francisco it may pay to inquire with an SF-based real estate developer or property attorney.