The TIC agreement
How co-owners live in a TIC building—including who owns each portion of the building—is governed by a contract: the TIC agreement. This agreement substitutes for an individual properly deed and condominium by-laws and its importance is critical.
The TIC agreement protects the owners of the property, specifies in advance how unforeseen events will be handled, and ensures that the property is maintained and bills are paid so that it remains an enjoyable place to live. Good agreements help owners solve problems and hopefully even head off problems before they arise.
Each agreement should include the following items as a minimum. These items are critical for a mortgage to be approved so be sure to check with your lender before you finalize this document to ensure their requirements are included.
- How the property is divided into individual and group areas, including who has the right to use these areas and how they will be maintained.
- How each owner’s monthly payment is determined. Each owner’s financial obligations: deposits, reserve accounts, taxes, maintenance, and other expenses.
- Rules about how the group will live together. Are pets allowed? What kind of noise regulations will there be? Are there
other issues that need to be covered? How will these rules
- How the property will be managed and maintained, including who will be responsible for collecting money and paying bills, how (and how often) owners will receive the financial reports, and how maintenance will be handled.
- How you will handle a co-owner’s death or bankruptcy.
- How the group will resolve co-owners disputes.
- Provisions regarding defaults. What constitutes a default? How will they be handled?
- How the sale of interests will be handled, including group approval of prospective purchasers, and the rights of first refusals.