A condominium (condo) is an individually owned piece of real property with a shared common area. Each owner has the equal right to access and to use the common areas, which may include hallways and heating systems. However, each owner has the exclusive right to use his own unit, and is in charge of his own mortgage, utilities, property taxes, and homeowner association dues. For example, an individual owner has the right to go into a common garden area of his building but cannot enter into his neighbor’s private unit.
A Tenancy-in-Common (TIC) may be a risky purchase. Unlike condos, the owners of a TIC have undivided interests in the property. This means that an individual owner has the right to enter and to use the entire building, including his neighbor’s unit. However, starting in the 1990s, San Francisco changed the definition of a TIC to mean that the owner has bought his unit for the purpose of individually occupying each unit. To enforce this new definition, there is an unrecorded written agreement between the owners.
Generally, owners of a TIC share the obligation to pay their mortgage, property taxes, and maintenance of their property. If one owner fails to pay his share, then the other owners must cover the cost. Otherwise, the property may go into foreclosure and every owner will be kicked out of his unit.
Since condos are considered separate properties, the financial obligations of one owner will not become the obligation of another owner. Thus, if one unit is going through foreclosure, the other units are safe because they will not be kicked out nor will they have to repay the debt of that unit.
Moreover, a conversion to a condo will increase its property value because it will reduce the owner’s financial liability.
Buildings with two to six residential units qualify for conversion. Conversion may occur in one of the three methods:
- Automatic qualification via lottery bypass
- Expedited conversion program
- Annual conversion program
However, buildings with an eviction history may disqualify the conversion.
To start the process of converting a TIC to a condo, homeowners or their attorneys need to go to the San Francisco Department of Public Works to:
- Request an inspection of their property
- Get a survey map of their property from a land surveyor
- Prove occupancy with a sworn statement
Afterwards, the homeowners may submit an application for conversion. The application must include a CC&R. The CC&R is a complicated legal agreement that must state the decision making process of the homeowners’ association and any financial and maintenance responsibilities.
Due to the complexity of the paperwork and legal documents required to convert a TIC to a condo in San Francisco, homeowners use real estate attorneys to help them with the conversion process. An attorney can help you speed up the conversion process and prevent any future legal issues from surfacing from a poorly drafted CC&R.