While TICs are new to Los Angeles, they have a 40 plus year track record already in San Francisco. Owning a TIC is perfectly safe, however, the two main drawbacks with this property type that should be carefully considered before buying: Weak Associations and Limited Financing Options.

Can a tic do a 1031 exchange?

1031 Exchange Into a TIC (Tenancy In Common) Then, in 2002, the IRS issued Revenue Ruling 2002-22, which describes circumstances under which a TIC interest in investment real estate will qualify as 1031 exchange replacement property.

How do you make a tic?

A TIC is created when owners take title to a property, with the deed indicating each owner’s percentage interest. While it is wise to create a TIC agreement prior to the tenancy in common structure, it is not required.

What is TIC ownership?

Tenancy in common (also known as TIC and tenant in common, and co-tenancy) refers to arrangements under which two or more people co-own a parcel of real estate without a “right of survivorship”. This type of co-ownership allows each co-owner to choose who will inherit her ownership interest upon death.

Is TIC real?

Tenancies-in-common, also called tenants-in-common or TICs, have been a popular housing option in San Francisco and are recently on the rise in Los Angeles – but they can prove befuddling to the uninitiated.

Are TIC agreements recorded?

TIC agreements generally cannot be recorded (because doing so would create an illegal subdivision) and should be signed by each owner. If someone becomes a tenant in common without signing the TIC agreement, it is more difficult to enforce the agreement (as further discussed below).

Can a tic investment be a real estate investment?

The answer depends on the nature of the TIC investment, which the IRS has clarified in Revenue Procedure (Rev Proc) 2002-22. It specified the conditions under which the IRS may consider the purchase of a TIC interest an investment in real estate.

Can a tic interest be used as a 1031 exchange?

Then, in 2002, the IRS issued Revenue Ruling 2002-22, which describes circumstances under which a TIC interest in investment real estate will qualify as 1031 exchange replacement property.

How are property taxes divided in a tic agreement?

A well-drafted TIC agreement should divide property tax based upon each owner’s purchase price. This arrangement ensures that a TIC resale by one TIC owner will not cause the other TIC owners’ property taxes to go up. There are some nuances to the purchase-price based TIC property tax allocation model.

What are the different types of tic in California?

California allows four types of co-ownership that include community property, partnership, joint tenancy, and tenancy in common. However, TIC is the default form among unmarried parties or individuals who together acquire real property.