Published in June 2006 in 9 Bay Area Newspapers’ Sunday Supplement.

Tenancy in Common Gains Popularity in the Bay Area

The views from the hills of San Francisco are spectacular, to say the very least. The iconic panoramas of city lights and sweeping bay vistas have made the city famous. But while the Bay is certainly the gem of this nine-county region, forming a glimmering border around three sides of the San Francisco; it is also a stumbling block for many prospective home-buyers, making viable living space scarce and thus, expensive. Over the years, the solutions to this unyielding conundrum have been as unique and innovative as the people who inhabit the Bay Area. Tenancy-in-common, or TIC, though not a new concept, is a remedy that is rapidly increasing in popularity.                       

Condominiums have long been the preferred means of entering the dauntingly expensive Bay Area real estate market. In fact, mounting demand for condos has prompted local governments to enact laws limiting condo conversions as the paucity of the supply of apartments has become more and more evident. Limiting the conversions has had the unintended result of creating long waiting lists and drastically increasing the expense of such conversions. The consequence: condos are becoming increasingly expensive, though still less so than traditional single family homes.

In San Francisco, this market force is one of many prime factors galvanizing the TIC resurgence. According to Bonnie Spindler, a prominent realtor with San Francisco based Zephyr Realty stated in a recent newsletter, “Just like in previous times in history, land is at a premium… Adding fuel to the fire, zoning laws have become very restrictive while expansion, tearing down old properties and creating new housing has been banned or put under moratorium.  Condo conversions in buildings over six units have been banned and conversions have slowed in older or pre-existing buildings under six units.”

For many, the TIC alternative opens the door to home ownership. The main distinction from owning a condo is, “With a condo, you own the unit you are buying and in which you live, and you share the ownership and upkeep of the common areas,” Spindler explained. “A TIC is a shared ownership of a single property among two or more persons. What is key is that the ownership is ‘undivided,’ everyone owns a percentage of the whole building. There is no subdivision of the property as there is with a condominium,” she elaborated.

In the East Bay, where space constraints are not quite as extreme, the concept has been slower to catch on. Amy Robeson, an agent with Red Oak Realty in Berkeley has noticed a more gradual boost in TIC inquiries. “It feels like we’re seeing a bit more of them lately,” she asserted. Another reason that prospective East Bay home buyers may hesitate is that, “When you enter into a TIC agreement, you’re sharing the liability with perfect strangers; that element of risk scares many people away.” For precisely this reason, contributing a substantial down payment is one method that those who are anxious to join a TIC situation often employ. “The hefty down-payment gives other tenants n common a sense of security,” Robeson explained. On the flip side, that sense of security can be shattered if a fellow tenant defaults. “When you buy a condo you go out and get a loan, the loan is in your name, you are the only one responsible and you’re only liable for your own actions. In a TIC arrangement, if your neighbor defaults on his loan it affects you,” Robeson elucidated. Still, according to Robeson, entering into a TIC arrangement is preferable to renting an apartment, “If you don’t have a lot of funds, TIC’s are 100% owner occupied so they tend to be very well maintained. There’s a definite pride of ownership there.”

And therein lies the essence of the pursuit of property, pride of ownership. In the Bay Area’s challenging market, sometimes traditional avenues just aren’t enough. That’s when innovative solutions like TIC pave the way. And at the end of the road lies somewhere to call home.

For additional information, visit www.bonniespindler.com or www.redoakrealty.com.

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