How Shared Ownership Affects Property Taxes in TICs

Property Taxes in TICs Aren’t Like Condos

If you’re buying a Tenancy in Common (TIC) unit in California—especially in a high-value market like Los Angeles or San Francisco—it’s essential to understand how property taxes are assessed, billed, and paid under a shared ownership structure.

Unlike condos, where each unit has its own legal parcel and tax bill, TICs share a single legal parcel. That means the county assesses one tax bill for the entire property, not individual units. The result? Property taxes in TICs require coordination, transparency, and careful financial planning among co-owners.

This guide breaks down how shared ownership affects property tax responsibilities in TICs—and what every buyer and agent should know before closing.

Why Property Taxes Work Differently in TICs

In California, property taxes are assessed at the parcel level, not the unit level. Because a TIC property is a shared undivided interest in a single parcel, the county does not recognize individual TIC units as separate properties.

That means:

• There is one tax bill for the entire property

• The bill is typically sent to a designated "tax contact"

• Co-owners must split the bill among themselves based on ownership share or an alternative agreement

This structure differs from condos, where each owner receives a tax bill for their legally subdivided unit.

SACO TICs and Assigned Shares

Most modern TICs in Los Angeles are SACO TICs—space-assignment co-ownerships—where each co-owner has exclusive occupancy rights to a specific unit. Despite this quasi-individual setup, the property remains one legal tax parcel.

In a SACO TIC:

• Your legal ownership interest (e.g., 40%, 60%) is recorded in the TIC agreement

• This share typically determines your property tax contribution

• Even if your unit is larger or more upgraded, the county doesn’t differentiate—you and your co-owners are responsible for allocating tax obligations among yourselves

When and How the County Reassesses TIC Properties

Under California’s Proposition 13, a property is reassessed at market value only when it changes ownership. In a TIC, that means:

• The entire property may be reassessed if 100% of ownership transfers

• A partial reassessment may occur when an individual TIC share is sold

• The new buyer’s portion is typically assessed at market value, while the remaining shares retain their Prop 13-protected value

For example: If one co-owner sells their 40% interest for $800,000, the county may reassess only that share at the new value—while the other 60% retains its original assessment.

The result is a blended property tax bill, which must be prorated among co-owners based on the assessed value of their respective shares.

How Co-Owners Divide the Tax Bill

There are two primary methods TIC owners use to divide property taxes:

1. Proportional by Ownership Share

The most common approach, where each owner pays based on their legal percentage of ownership as recorded in the TIC agreement.

Example:
If the total annual tax bill is $18,000 and your share is 50%, you owe $9,000.

2. Based on Assessed Value (Post-Reassessment)

If ownership shares were sold at different times and reassessed unequally, co-owners may agree to divide taxes based on actual assessed value of each share instead of legal percentage.

This method requires careful coordination and clear communication to avoid disputes.

Who Receives the Tax Bill?

Counties issue one tax bill for the entire property. Typically:

• The bill is sent to the person designated as the "tax contact"

• This person is responsible for distributing copies to co-owners

• Payments must be collected and submitted as one single payment to the county (not split by unit)

Pro Tip: Designate a reliable tax contact and confirm their role in the TIC agreement.

Risks of Mismanaging Property Taxes in a TIC

Because there’s one tax bill, a failure to pay affects everyone on the title. Risks include:

• Tax liens placed on the entire property

• Foreclosure if the county proceeds with collection

• Strained relationships if one co-owner fails to pay their share

This is why a well-drafted TIC agreement should outline tax payment procedures, deadlines, and penalties for non-payment.

Should You Escrow Property Taxes Monthly?

Many TIC owners choose to escrow taxes through their fractional loan provider, where monthly tax payments are included with the mortgage.

This offers:

• Predictable monthly budgeting

• Automatic payments to the county

• Reduced risk of missed deadlines

However, not all TIC lenders offer escrow, so it’s important to ask during financing and coordinate with other owners.

What Should Be in the TIC Agreement About Taxes?

A strong TIC agreement should include:

• The name of the designated tax contact

• The method used to divide the tax bill

• When and how taxes must be paid (monthly, semi-annually)

• What happens if a co-owner fails to pay

• Whether taxes are included in monthly dues or paid separately

If this section is vague or missing, request that it be updated by a TIC attorney before closing.

Property Tax Deduction: Can TIC Owners Claim It?

Yes. Each TIC owner can claim the property tax deduction for the portion of taxes they pay, as long as:

• They are on the title

• They actually paid their share of the taxes

• They itemize deductions on their federal return

Always consult with a tax professional or CPA to ensure proper reporting and documentation.

What About Supplemental Tax Bills?

When a TIC share is sold, counties may issue a supplemental tax bill reflecting the reassessed value of that share.

Key points:

• These bills can arrive months after closing

• They are the responsibility of the new owner

• The TIC agreement should specify how these bills are handled

Failure to pay a supplemental tax bill can result in penalties—so buyers should budget for this possibility during the first year.

OLIVER THORNTON
CO-CEO AND R.E AGENT | HOLLYWOOD ESTATES
PARTNER | THORNTON DEVELOPMENT GROUP

310.704.1794
[email protected]
DRE# 01969227