REAL Exclusive Magazine

TIC* 101 FOR REALTORS^®

(*Tenant-In-Common)

By Jeff Riddell

What’s a TIC?

TIC stands for tenant-in-common. Tenant-in-common is a way for multiple owners to own real estate.  Each tenant-in-common owns an undivided interest in the real estate that all the tenants-in-common own together. If two people own and no percentages are shown in the deed, they are presumed to be 50/50 owners. 50/50 or other percentages can be specifically stated in the deed by which the tenants-in-common take title. This form of ownership of real estate is nothing new, in fact it is ancient.

When people own real estate as tenants-in-common and in the absence of an agreement to the contrary, each tenant-in-common may treat his percentage in the same way as he could treat the property if he owned 100% of it. In other words, their percentage can be sold, inherited, 1031 exchanged, etc.

There are private TIC’s that anyone can set up if they want to own real estate with others (and for various reasons the co-owners do not want to set up an LLC, land trust, partnership, etc.) and there are syndicated TIC’s. Syndicated TIC’s are what this flyer is about.

What’s a Syndicated TIC?

A syndicated TIC is a large multi-million dollar rental property (shopping center, office building, apartment development, etc.) that a real estate company (sometimes called a “sponsor”) purchases or arranges to purchase so that percentage interests can be sold to investors, especially 1031 exchangers. Syndicated TIC’s are sometimes referred to as fractionalized ownership.

Except for a few TIC’s that are packaged a different way (called Delaware Statutory Trusts or DST’s), the investor in a syndicated TIC receives a deed by which he receives his percentage of the property, and title insurance policy insuring his ownership.

In other words, the way the syndicated TIC purchaser receives his real estate is about the same way as he would receive title to a 100% ownership property. A TIC deed and title policy might, for instance, describe the ownership interest as “a 3.45% undivided interest in and to (followed by the full legal description of the property).

Most syndicated TIC properties are what is called “institutional quality property” and the values of the properties range from around $20 million to over $100 million. All have minimums for purchase of a TIC interest in the property, and the minimums range from about $200,000 to over $1 million. In 2002, IRS approved syndicated TIC’s as replacement property for 1031 exchanges, but people not doing 1031 exchanges may also purchase TIC’s as real estate investments.

Why Do I Care?

Syndicated TIC’s are a phenomenon. Their popularity is growing rapidly since IRS approved them as 1031 exchange replacement properties in 2002. As a REALTOR^®, your knowledge should include TIC’s so you know what people are talking about if the subject comes up. Also, if you are assisting people with 1031 exchanges, you certainly need to know about TIC’s since so many 1031 exchangers have heard about and are considering them as replacement properties.

Can I Get A Commission?

Maybe so, but probably not. Syndicated TIC’s are sold as either real estate or securities. For those that are sold as real estate, you might be able to get a commission from the sponsor. For TIC’s that are sold as securities (which is the vast majority), you will not be in line for a commission on the sale of one to your client unless you have a securities license as well as a real estate license. 

Most REALTORS^® do not have a securities license, so you might be out of luck as far as commissions are concerned unless you find a sponsor who still sells syndicated TIC’s as real estate (there are a few). It is expected that less and less TIC sponsors will be selling syndicated TIC’s as real estate. If you want to obtain a securities license (and your broker permits dual licensing), we can refer you to one or more places where you can explore this. Some REALTORS^® obtained securities licenses in the 70’s and early 80’s so they could receive commissions on sale of real estate limited partnership interests (does anyone remember RESSI?).

What’s In It For Me Then?

First, use your knowledge about TIC’s to get listings and sales, especially of vacant land, business, rental and investment properties. If you know about TIC’s, you can suggest a tax free exit strategy for such property owners. Many owners would list and sell if they knew of an easy way to avoid payment of capital gains tax by selling their traditional property and reinvesting, tax free, in a passive investment like one or more TIC’s. Often they can give themselves a raise over what they net from the property they are selling. Knowing about TIC’s can often get people off the fence about selling.

Second, you can help your clients sell in a 1031 exchange, then sell them one or more traditional replacement properties and, finally, suggest they buy a TIC with the 1031 funds left over (assuming there is enough left to satisfy the TIC minimums which start at about $200,000). If the seller will net enough to allow it, there is nothing wrong with mixing together some traditional and TIC properties as replacement properties.

Either of these can make you a hero with your client and, of course, heroes get repeat business and referrals.

Jefferson F. Riddell is a Florida Board Certified Real Estate attorney with thirty-five years of experience assisting people with a variety of residential and commercial real estate matters. U.S. 1031 Exchange Services, Inc is a 1031 exchange qualified intermediary (QI) and a member of the Federation of Exchange Accommodators (FEA). As President of U.S. 1031 Exchange services Jeff has been facilitating 1031 exchanges for more than twenty years. Jeff has been awarded the Certified Exchange Specialist (CES) certification.

As a licensed securities registered representative and real estate broker, Jeff is uniquely qualified to assist those who wish to avail themselves of 1031 and 1033 exchange tax savings and also guides investors in diversifying their portfolios with non-publicly traded REIT, LP and LLC real estate investments. Jeff’s new book, 21^st Century Real Estate Investing Featuring 1031 + TIC has recently been published and is available at Amazon.com. Jeff may be reached at 941-366-1300 or via email at jeff@us1031.com.