What is a TIC Agreement (Kapner v. Meadowland Ranch Assn. (2004) 116 Cal.App.4th 1182)

Underwood-Blog-Images-1-1-300x300A “TIC” Agreement is a contractual agreement between tenants in common to real property. Because each tenant in common is a co-owner of the property, these agreements can help spell out the rights of each, preventing future disputes over payment or occupation. And, if the dispute cannot be prevented, the agreement, acting as a binding contract, provides a clear guideline for a judge to use in a court action, ensuring that the lawsuit moves along as quickly as possible. 

That being said, an imperfect TIC agreement can wind up doing more harm than good in certain situations. If it fails to include a partition waiver, for example, one co-owner can actually attempt to force a sale of the entire property outright. 

As such, it is important for any prospective co-owner of real property to choose the right attorney for the job. At Underwood Law Firm, our attorneys are well-versed in the law of co-ownership, and we know the best ways to tackle the disputes that accompany it. Our team has the legal acumen and skills necessary to help you achieve your ownership goals.  

What is tenancy in common? 

Tenancy in common is one of several forms of property co-ownership in California. In many ways, it can be thought of as the “default” method for co-owning property. It is easy to create and easier to maintain. 

All that is required to become a tenant in common with another owner is the equal right to possess the property. (Kapner v. Meadowland Ranch Assn. (2004) 116 Cal.App.4th 1182, 1189.) Ownership shares do not need to be equal, nor do all the owners have to acquire their interests at the same time through the same deed or other instruments (such as a will). 

In addition, each co-owner has many of the rights we usually associate with owning property. Each can sell their interest, for example, without the consent of their fellow cotenants, if they so choose. (Wilk v. Vencill (1947) 30 Cal.2d 104, 108.) And if there are more than two co-owners of a property, a sale of one’s interest does nothing to disrupt the tenancy in common between the others. Plus, when the new co-owner comes in, they can be seamlessly added to the ownership scheme. 

Each co-owner can even separately encumber their own interest because it attaches only to the interest of that one cotenant. (Schoenfeld v. Norberg (1970) 11 Cal.App.3d.) 

Why do co-owners enter TIC agreements? 

While tenancy in common is flexible, it brings with it implied rights and duties that some co-owners are simply unaware of. For instance, each cotenant to a property is responsible for their proportionate share of common property expenses, like property taxes. (see Little v. Mountain View Dairies (1950) 35 Cal.2d 232, 234.) So, if “James” owns 20% of the property as a tenant in common, and “Lily” owns 80%, then James is only responsible for 20% of common costs. 

Another overlooked issue is the primary feature of the tenancy in common itself: the right to possession. Each co-owner actually has the right to possess the whole property. But at the same time, no cotenant can exclude the others, or else they have committed an ouster under the law.  

These issues aptly demonstrate the reason co-owners enter TIC agreements: to clearly identify the responsibilities each has in relation to the others. That way, any failures to stand by the TIC agreement sound in contract and are easily curable by a court if need be. 

This is especially true in ownership schemes where the owners are merely business partners or don’t know each other very well. What happens when the property tax bill actually arrives? Does Lily pay the whole thing off and then ask James for his portion? Do they both pay into a shared account beforehand? What happens if James refuses to pay because he thinks Lily has been committing waste on the property? 

TIC agreements can answer these questions, and many more, if drafted adequately. 

What do TIC agreements commonly cover? 

In California, TIC agreements are particularly popular in San Francisco. The city has many multi-unit buildings that aren’t technically condominiums because of a zoning law or lack of approval by the city board. So, many home buyers decide instead to acquire multi-unit buildings as tenants in common with others and then make TIC agreements among themselves so that each owner has the exclusive right to occupy a particular unit in the property. (Tom v. City and County of San Francisco (2004) 120 Cal.App.4th 674, 677.) 

But TIC agreements cover more than just what parts of the property each cotenant may occupy. They also typically establish rules whereby each cotenant has to pay their pro rata share of costs in operating the property, like taxes and utility fees. (Ashlan Park Center LLC v. Chow (2015) 223 Cal.App.4th 1274, 1282.) They can also have provisions to ensure that each co-owner does not commit waste or nuisance, much like a rental agreement. 

Perhaps most importantly, however, TIC agreements usually feature a waiver of the right to partition. Normally, co-owners of real property have the absolute right to partition the co-owned property, meaning they can go to court and possibly force a sale of the real estate outright. 

This obviously poses some serious problems for the other co-owners, especially because TIC agreements were born out of the ever increasing cost of acquiring residential property in California. Thus, parties entering these agreements should expect that they will need to waive this right from the outset to ensure that the property is not forcibly sold. 

How can the Attorneys at Underwood Law Assist You? 

Co-ownership disputes are incredibly common in California, especially between business partners. And, absent a proper TIC agreement between the parties, it can be hard for every cotenant to understand just what costs they are and aren’t responsible for. In these situations, emotions run high, and each cotenant may feel confused about what steps they can take to either get reimbursed or to free themselves of responsibility for payment.   

As each case is unique, property owners in these situations would be well-served to seek experienced counsel familiar with cotenancy, TIC agreements, and partition actions. At Underwood Law, our knowledgeable attorneys are here to help. If you are concerned about the validity of your TIC agreement, wondering what it takes to draft one, or if you just have questions, please do not hesitate to contact our office.  

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