What Is a TIC Agreement and Do You Need One?

This post is for informational purposes only and does not constitute legal or financial advice. Tenants in common arrangements involve legal and financial considerations that vary by situation. We recommend consulting a licensed real estate attorney before entering into any ownership agreement.

When you purchase property as tenants in common, the title tells the world who owns the property and in what percentages.

What the title does not tell you is how the owners have agreed to handle the day-to-day realities of shared ownership. Who pays for a broken furnace? What happens if one owner stops making mortgage payments? What if someone wants to sell but the others do not?

Those are the questions a TIC agreement is designed to answer.

A TIC agreement, sometimes called a tenants in common agreement or co-ownership agreement, is a private legal contract between all of the co-owners of a property.

It is separate from the deed. The deed establishes ownership. The TIC agreement governs the relationship between owners and sets the rules for how the property will be managed, maintained, and eventually sold or transferred.

Think of it as the operating manual for your shared ownership. It does not change who owns what. It establishes what each owner is responsible for and what process the group will follow when decisions need to be made.

No. California law does not require tenants in common owners to have a written agreement in place.

But the absence of one creates real risk.

Without a TIC agreement, disputes between co-owners are governed by default rules under California law. Those rules are not always practical, and they rarely reflect what the owners actually intended. In some cases, the only resolution available is a partition action, where a court orders the property sold so the proceeds can be divided.

A TIC agreement cannot prevent every dispute, but it gives the owners a framework for resolving them without going to court.

Every TIC agreement is different, but most address the following areas:

The agreement documents each owner’s share of the property. This is especially important when contributions are unequal, since the deed alone may not fully capture the intent behind the split.

This section covers how costs are divided. Mortgage payments, property taxes, insurance, utilities, and routine maintenance are all expenses that need a clear allocation. Without one, disagreements over who owes what can escalate quickly.

Co-owners do not always agree. A TIC agreement can establish how decisions are made, which decisions require unanimous consent, and which can be made by a majority. This is particularly important for larger decisions like renovations, refinancing, or leasing part of the property.

In multi-unit TIC purchases, such as those common in San Francisco and Los Angeles, the agreement typically grants each owner exclusive occupancy of a specific unit. This is a critical provision in those arrangements, since without it, every owner technically has the right to use the entire property.

Many TIC agreements give existing owners the right to purchase a departing owner’s share before it is offered to an outside buyer. This gives the remaining owners some control over who joins the ownership group and can prevent an unwanted third party from entering the picture.

Related to the right of first refusal, a buyout provision establishes how the purchase price will be determined when one owner wants to sell. This might involve an agreed-upon formula, an independent appraisal, or another valuation method the owners settle on in advance.

What happens if all owners want to sell? What if only one does? The agreement should address how the property will be listed, how proceeds will be distributed, and what happens if the owners cannot agree on a sale price or timeline.

If one owner stops paying their share of the mortgage or other expenses, the agreement should address what the other owners can do. This is one of the most important protections in any TIC arrangement, since a default by one owner can affect everyone’s credit and financial position.

In cities like San Francisco and Los Angeles, TIC ownership is commonly used to purchase individual units in multi-unit buildings that have not been converted to condominiums. In these situations, the TIC agreement takes on even greater importance.

It typically functions more like a condominium declaration, assigning each owner a specific unit, defining shared spaces, establishing rules for common area maintenance, and setting procedures for building-wide decisions.

These agreements tend to be more detailed and more complex than those used in single-family TIC purchases, and they are almost always drafted by an attorney with experience in local TIC law.

The best time to draft a TIC agreement is before you close on the property.

Once everyone is already an owner, it becomes harder to negotiate terms. People’s priorities shift, and the dynamic of the conversation changes when the transaction is already complete.

Drafting the agreement during the purchase process, alongside your other closing documents, ensures that all parties have agreed to the terms before they become co-owners. It also gives each party time to review the agreement with their own attorney if they choose.

If you are already a co-owner without a TIC agreement in place, it is not too late. Having one drafted now is still far better than relying on default legal rules if a dispute arises.

A TIC agreement is a legal contract. Templates and online resources exist, but they rarely account for the specific details of your situation, the property, or California law.

Working with a real estate attorney to draft or review your TIC agreement is one of the most practical investments you can make when entering into a co-ownership arrangement. The cost is modest compared to the potential expense of resolving a dispute without one.

A TIC agreement will not prevent every disagreement between co-owners. But it creates a clear framework that makes most disagreements easier to resolve, and it protects everyone’s interests when the unexpected happens.

If you are moving forward with a tenants in common purchase, putting a solid agreement in place before closing is one of the most important steps you can take.

For questions about how the financing side of a TIC purchase works, we are here to help.