Tenants In Common: A Recipe for Disaster?

people In a place as expensive as New York, it's tempting to think of pooling resources with friends to buy a bigger place than each person could afford on his or her own. Such an arrangement (in which the purchasers typically hold title as Tenants as Common), each owner has an equal right to possession of the property, and any owner can transfer his or her interest independent of the other owners. For this reason, it's crucial to define up front any restrictions on the transfer, such as giving the other owners a right of first refusal. You really have to trust the others, as chances are you will be jointly and severally liable on the mortgage, which means that if one member flakes out or runs into financial problems, you're left holding the bag. Which isn't to say it can't be done, but we'd be pretty darn wary. Have any readers done this, for better or for worse?
When Friends Buy a House Together [NY Times]
Real Estate Swinging: Couples Doubling Up [Brownstoner]
Illustration by Tom Bloom

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we just bought something smaller rather than pursue this, but in san franscisco, where i lived for a while, this is standard practice. similar to brownstones in size, there are all those older victorian homes that are perfect for two-three couples.

Posted by: dahl at January 22, 2007 9:48 AM

I own a rowhouse with a TIC situation with one partner since 2004. I'm solely responsible for the mortgage and she's wholly responsible for managing the rental situation. It has been absolutely perfect.

Posted by: empiress at January 22, 2007 10:10 AM

Three friends and my wife and I bought a building in Tribeca as TIC. It would have been fine except for problems with renovations. A developer ended up buying us out. This situation is difficult enough without adding in the stress of renovations. If you are going this route, definately get something finished.

Posted by: TIC at January 22, 2007 10:18 AM

The part that would scare me off is sharing the mortgage. It's not just about trust, though it takes a lot of that, but the fact that who can predict what will happen in another couple's life? Like what if the other couple divorces? Or loses their job? Or has catastrophic illness? To me, doing a TIC is like one couple legally marrying another couple. Their finances become your finances.

Posted by: Anonymous at January 22, 2007 12:06 PM

I looked into this when i first thought of trying to get into the game about 3 years ago. I got irresponsible loans instead. ;)

Posted by: greenwood slope at January 22, 2007 12:35 PM

I currently do this with a brickface in Crown Heights. As noted, renovation is probably the hardest hurdle. We really fleshed all this out in our partnership agreement for the building - that we'd agree on all building details and construction techniques, etc. We also agreed up front on a host of other stipulations, like catastrophic illness, death, divorce, one party moving out, two parties moving out (there are three parties involved), and selling the property with first right of refusal. The one thing we simply wouldn't allow was someone to move out and rent their share, because then the remaining people are stuck with a potluck housemate. If you do this, just make sure you're prepared and that everything is in writing.

Posted by: fencer at January 22, 2007 1:42 PM

The Times reprints the same article every year. The change the names and neighborhoods - but otherwise, nothing new to add.

Posted by: Anonymous at January 22, 2007 1:42 PM

The TIC thing is very popular in SF where there is heavy rent control and little / no condo conversion (and no co-ops). I believe there are lenders out there doing individual TIC mortgages which reduces the liability of the relationship going bad.

Posted by: Sassy at January 22, 2007 2:20 PM

Can't agree more with fencer. Get "everything" in writing, even the smallest details. Situations always arise. I was preparing an operating agreement for three couples to purchase a vacation home together (we were one of the three) and we ended up not buying the place b/c we realized (as a result of ROFR terms, etc) that we weren't all of the same mindset as far as the property was concerned. Better to provide for all contingencies in writing at the outset than to ruin a friendship later on.

Posted by: Anonymous at January 22, 2007 2:41 PM

Yeah this is big in PRSF because there is a ceiling on condo conversions -- I believe it's 200/year. Shockingly low and quite ridiculous. Anyway, I don't know of many major problems -- as in all real estate transactions, get a good lawyer.

Posted by: Jeremy at January 22, 2007 4:41 PM

I posted this idea in the forum section 2 months ago, and got various helpful responses and opinions. See http://brownstoner.com/forum/archives/2006/12/purchasing_half.html#comments

Posted by: Anonymous at January 22, 2007 5:56 PM

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January 22, 2007

Tenants In Common: A Recipe for Disaster?

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