Los Angeles is one of the most expensive cities to buy a house. As such, it is not unusual for people to capitalize on the chance to buy a house for less.
One option for doing this is a tenancy in common (TIC). This arrangement allows multiple parties to buy property. Often, the property has multiple units that can be shared by multiple owners, like a bungalow court. However, before you agree to a TIC arrangement, you should know the advantages and disadvantages.
Advantages of TIC
Perhaps the primary benefit of TIC is that it can be cheaper for a few different reasons. First, as this article points out, there may be fewer people interested in sharing a property through TIC, meaning a unit could sell for around 15 percent less. TIC also allows owners to split property taxes, as well as certain other expenses on the property.
Another advantage for many buyers is the flexibility of tenancy in common agreements. Unlike other arrangements, like joint tenancy, the number of tenants in a TIC can change and the percentage of property each person owns can vary.
Disadvantages of TIC
While TIC can be more affordable, it can be more difficult to actually purchase TIC properties, as only two banks offer the necessary fractional loans.
Further, conflicts can arise among co-owners, and these conflicts could have costly repercussions. For instance, if one owner fails to pay his or her share of property taxes or the mortgage, the other owners may need to cover the difference, as all owners share accountability.
Disputes can also arise when owners disagree on improvements or construction on the property. If only one owner wants something, he or she will have to cover the expense alone.
There can also be challenges when it comes to selling a share or the property. In some cases, tenants may sell or transfer their portion to someone with whom the other owners do not want to share the property. In other cases, one owner could force the sale of the entire property or pursue a partition action to physically divide the property.
It is important to consider these benefits and drawbacks before entering any tenancy in common agreement. You can also consult an attorney to more thoroughly understand your legal options. Taking these precautions can allow you to make informed decisions that are in your best interests.