That Popular Acronym in San Francisco – T.I.C.

The tenancy-in-common (TIC) has been San Francisco’s answer to shared, affordable housing in hundreds, if not thousands, of its architecturally significant Edwardian and Victorian buildings. But since the city restricted the number of annual conversions to 200 beginning in 1994, the pool of potential units and buildings has grown immensely. Owners of units in 3-6 unit buildings must hold a coveted winning ticket in annual lottery (2 unit buildings bypass the lottery after meeting the owner-occupancy test after 1 year). The lottery was created in 1983.


The issue for would-be condo converters in recent years has been the rapidly increasing number of entrants into the lottery while the cap remains at 200. Since 2003 the number of entrants has increased 75% to 1,736 last year. While the lottery system is meant to give “losers” a better chance each ensuing year with extra tickets, the growth in entrants has rendered this system useless and odds actually can decrease each year. According to well known attorney, and the recognized creator of virtually all of San Francisco’s TIC agreements, Andy Sirkin states the current estimated time to convert a building to condominiums is at least 15 years.

Advocates for condo conversion reform say home ownership is great for the city and neighborhoods — you know, creating that “ownership society’ that Dubya talked about. And I emphasize “talked” in past tense. It has also been the only way for some San Francisco residents to afford a home of their own, and to finally escape the life of renting.

Opponents of TIC creation cite the displacement of too many renters, often elderly “protected” tenants in rent-controlled buildings, who now have nowhere to go and cannot afford to rent a new place. The greed of real estate investors (both professional and amateur) have been allowed to make hundreds of thousands of dollars at the expense of good citizens who need a place to live, they say.

In recent years, a new financing option has been made available by a handful of banks, mostly local, by offering “fractionalized” loans, with stricter qualifications, of course. This differs from the traditional group financing necessary in TIC arrangements where all parties are on one giant mortgage and share the responsibility for maintaining that loan obligation. (I am sure you can see the danger and risks of this, especially when parties do not know each other well). This new fractionalized loan essentially eliminates the need to condo convert because it allows the units to be separately deeded and therefore frees each owner of the shared loan responsibility with his/her co-tenants (that is what they are called in a TIC agreement).

In the interest of full disclosure, I used to own a unit in a 3 unit TIC building, but like a lot of things in my life, found I was too impatient to hold the property long enough to convert to condominiums, and the terms for the fractionalized loans were new and much more expensive than they are now.

So, whether reform happens regarding the number of units allowed to convert via the lottery or not, TIC owners have options. And the appeal of a TIC in the first place is that you typically get more for your dollar compared to a condo. And once you do convert (historically, assuming you have a terrible sense of timing) or refinance into a fractionalized loan, you will extract added value and build equity, assuming all else is equal.