Hollywood Living
When you buy into a Tenants in Common (TIC) property—especially a SACO TIC where each co-owner has exclusive occupancy rights to a specific unit—you’re not just buying a share of real estate. You’re entering into a legal relationship with your co-owners. That relationship is governed by the TIC agreement, a private contract that defines your rights, responsibilities, and remedies.
Reading a TIC agreement carefully is crucial. It’s not a standard real estate form—it’s a custom document that replaces many of the rules a condo’s HOA would otherwise impose. In this blog, we’ll walk through the key clauses every buyer should understand, offer red flags to watch for, and empower you to ask the right questions before signing on the dotted line.
A TIC agreement is a legal contract between co-owners of a shared property that:
Assigns exclusive occupancy rights (in SACO TICs)
Details financial responsibilities like expenses, reserves, and insurance
Outlines decision-making processes and dispute resolution
Protects each owner’s rights and sets limits on use and resale
Unlike a condo, where rules are set by the HOA and public bylaws, a TIC agreement is privately negotiated. It replaces and redefines many of the protections a condo buyer might take for granted.
You could fall in love with the unit—but if the TIC agreement is poorly written, outdated, or legally weak, you might face serious issues later, including:
Inability to get financing
Disputes with other owners
Limitations on resale, rentals, or renovations
Risk of being dragged into another owner’s financial problems
A professionally drafted TIC agreement—especially one written by experts like SirkinLaw APC—is non-negotiable for a smooth ownership experience.
1. Exclusive Occupancy Rights
This section clarifies which portion of the property you have the exclusive right to occupy. Look for:
A specific description of your unit (e.g., “Unit B, upstairs 2-bedroom apartment”)
Diagrams or exhibits confirming the unit layout
Shared areas outlined (e.g., garden, garage, driveway)
Without this clause, your right to your home is legally ambiguous—and that can derail financing or cause future disputes.
The agreement should clearly state each owner’s:
Percentage interest in the property
Proportion of property tax, insurance, and repair obligations
Voting weight (if different from ownership share)
Ensure your share reflects your unit’s size, value, or negotiated position. Misaligned shares can lead to unfair expense burdens or governance imbalances.
Especially in SACO TICs, this section outlines whether:
Fractional loans are allowed (recommended)
Group loans are restricted or prohibited
Co-owners must disclose refinancing plans to each other
Lender approval is needed for agreement changes
Make sure the agreement supports independent financing, so you’re not financially tied to your neighbors.
This clause should:
Allocate responsibility for unit maintenance vs. common area repairs
Outline how decisions are made for big-ticket items (e.g., roof replacement)
Explain reserve fund contributions, if any
It’s vital to know who pays for what—and what happens if someone doesn’t pay.
TICs often function like informal HOAs. The agreement should describe:
Monthly contribution amounts or formulas
Due dates and payment methods
Penalties for late or missed payments
How the annual budget is created and shared
Review the budget and ensure your share is reasonable based on your unit and share of ownership.
Good TIC agreements create clear, fair decision-making rules. This section should define:
What decisions require majority vs. unanimous votes
How votes are counted (equal per owner or weighted by share?)
Whether meetings are held, and how they’re documented
Tie-breaking processes or mediation options
Ambiguity here can lead to gridlock—or one owner dominating the group.
This clause covers:
Whether you can rent your unit (short or long term)
How tenants must be approved, if at all
Occupancy rules (e.g., no more than 2 unrelated adults per unit)
Rental restrictions affect resale, refinancing, and investment flexibility. If you plan to lease your unit or eventually move out, this section is crucial.
The TIC agreement should spell out:
Whether you need approval to sell your unit
If other owners have a right of first refusal
What documentation must accompany a sale
Whether there are minimum listing or valuation terms
You want flexibility to sell—but with fair safeguards that protect the group’s stability and avoid unwanted buyers.
No matter how harmonious a group is at purchase, disagreements can arise. A good TIC agreement includes:
A clear dispute resolution clause (e.g., mediation → arbitration)
Steps and timelines for resolution
Legal costs or fee-sharing responsibilities
Without this, conflicts can escalate to litigation—and fracture the ownership group.
Finally, the agreement should include a clause outlining how changes can be made. Typically:
Some clauses require unanimous approval
Others can be changed with a majority or supermajority
Understanding amendment thresholds helps protect your rights while allowing for flexibility as circumstances evolve.
Beware of agreements that:
Are outdated or lack legal review
Leave unit descriptions vague or incomplete
Have no clear dispute resolution or sale procedure
Include group loans or tie owners’ finances together
Grant too much power to a single owner or sponsor
These issues can complicate financing, resale, and peaceful co-ownership.
Yes—especially if the agreement wasn’t drafted by a specialist or hasn’t been updated in years. A TIC-savvy real estate attorney can:
Translate dense legal language
Flag high-risk clauses
Suggest amendments before closing
Coordinate with your lender or agent
For high-value transactions in Los Angeles, a TIC legal review is a smart investment in your ownership peace of mind.
OLIVER THORNTON
CO-CEO AND R.E AGENT | HOLLYWOOD ESTATES
PARTNER | THORNTON DEVELOPMENT GROUP
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