Your Guide to Tenancy in Common Properties in San Francisco

TIC Lottery

With an 8-3 vote, San Francisco’s Board of Supervisors have just given initial approval to a piece of housing legislation that will allow for the conversion of thousands of tenancy-in-common (TIC) units into condominiums.  The structure of the TIC conversion system has been a source of contention between lawmakers and TIC residents for years.  Before this legislation was passed, TIC owners wishing to convert their units into condominiums were placed on a waiting list that allowed just 200 conversions annually.  Now, some 2,200 TIC owners have the option of paying a 20 thousand dollar conversion fee to turn their units into condominiums.  Lawmakers say this conversion fee will generate 20 million dollars, which will go toward affordable housing.

Why is this such a big deal?

Tenancy-in-common owners share joint ownership of a property.  Each tenant owns a fractional portion of the entire building, and co-owns the common areas with the other tenants.  Since each tenant owns part of the building, they must all work together to find financing.  This presents an issue if one tenant cannot pay the monthly loan, because everyone’s credit will be negatively affected.  To avoid this situation, TIC owners can try and take out a fractional loan.  Fractional loans are hard-to-get high interest loans made to each individual TIC unit owner, liberating them from potential financial burden if someone in their building defaults on their payments.  However, these loans are difficult to qualify for and the interest rate is about two percent higher than a loan on a condominium.

Opponents of this legislation argue that allowing TIC owners to bypass the lottery system currently in place to regulate the number of conversions will cause a large reduction in San Francisco’s rental stock.  They fear the decrease in available rental units will drive up rent costs, resulting in a high number of evictions.  In order to protect against this, legislators stipulate that in order for a TIC to qualify for condo conversion under the new law, it must be owner occupied.

Final approval of the legislation is expected in a few weeks.