{"id":2151,"date":"2022-04-15T10:00:00","date_gmt":"2022-04-15T14:00:00","guid":{"rendered":"https:\/\/www.deeds.com\/articles\/?p=2151"},"modified":"2024-04-25T23:18:45","modified_gmt":"2024-04-26T03:18:45","slug":"here-come-the-tenants-in-common","status":"publish","type":"post","link":"https:\/\/www.deeds.com\/articles\/here-come-the-tenants-in-common\/","title":{"rendered":"Here Come the Tenants in Common"},"content":{"rendered":"\n
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Making L.A. Affordable<\/em><\/strong><\/p>\n\n\n\n

A form of co-ownership called the tenancy in common<\/em><\/a> is picking up steam in California cities \u2014 most recently, in Los Angeles, where a company named B&A Group LLC is overhauling single-home properties so they become multi-unit townhomes.<\/p>\n\n\n\n

Each buyer receives a share of ownership in a townhome, with the exclusive rights over one section of the building. The co-owners pay monthly dues to a homeowners\u2019 association to cover maintenance costs.<\/p>\n\n\n\n

A set of new California \u201cupzoning\u201d laws<\/a> has made this model possible in more areas, so we\u2019re expecting the trend to take off. What\u2019s to like \u2014 and what\u2019s not to like \u2014 about the tenants in common model?<\/p>\n\n\n\n\n\n\n\n

The Great Potential of Tenancy-in-Common Developments<\/strong><\/h2>\n\n\n\n

B&A began creating its new townhomes in California even before S.B. 9, the zoning law that lets an owner of a single-unit property split the parcel into multiple housing units. Increasing housing supply and promoting (relative) affordability are the model\u2019s major advantages. Cities like San Francisco and L.A. are expensive. Plenty of renters are fatigued from years of paying $3,000 a month for one-bedroom, downtown apartments. They\u2019ve lived their lives and worked for years in these cities, but haven\u2019t been able to buy their own properties. Many have a strong desire to finally build equity in their own homes.<\/p>\n\n\n\n

And now, they might look to B&A\u2019s three-bedroom townhomes with their gardens or rooftop decks. Granted, B&A\u2019s shared title model is not for everyone. Thus, these townhouses \u2014 even with their new construction \u2014 have been selling for a lower price than the typical condos and townhomes. \u201cLower\u201d in California means a three-bedroom unit from B&A goes for $750K to $850K. The typical three-bedroom condo in L.A. would now go for more than a million dollars.<\/p>\n\n\n\n

The Core Criticisms of Tenancy-in-Common Developments<\/strong><\/h2>\n\n\n\n
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Some loan products might not be available for tenants-in-common ownership, so buyers need to consult with mortgage specialists to understand their financing options.<\/p>\n\n\n\n

On a more general level, a key concern focuses on developers\u2019 activities. What\u2019s stopping developers, beyond B&A, from pressing owners of modest homes to sell to them? As investors get into the model, will they be pushing real estate prices up and displacing the least advantaged residents in the areas they buy into? Will they start incentivizing low-income homeowners to sell, and then remake and sell those properties for hefty gains? Already, lower-income and minority homeowners have faced enough pressure.<\/p>\n\n\n\n

B&A admits the model is profitable. L.A. real estate companies can adopt it to sell townhomes and come out ahead of companies that sell whole properties to landlords. Plus, the tenancy in common saves the builders\u2019 time by shaving off the bureaucracy that comes with selling individual units. (California case law prevents cities from regulating tenancies in common. The legal logic? People have a right to freely share ownership of real estate.)<\/p>\n\n\n\n

For now, although B&A is certainly profiting, the company points out that it\u2019s spending a lot to transform old buildings into new townhomes, and then selling these at a relative discount (10-20% less than the typical price for a three bedroom in the areas). And B&A\u2019s agent points to a number of first-time home buyers who have in fact bought in as tenants in common.<\/p>\n\n\n\n

Densify It Yourself? Tips for Creating a Tenancy in Common  <\/strong><\/h2>\n\n\n\n

To beat the heat of urban and suburban real estate markets, friends are getting together and pooling their funds. For a successful tenancy in common (TIC) arrangement, it\u2019s vital to have the input of an attorney who\u2019s familiar with local laws. A good written agreement can avert legal and financial blunders. The agreement should speak to the following questions:<\/p>\n\n\n\n