SF Mortgage Spot

What If I Don't Qualify for My TIC Conversion Loan?

These tough economic times are hitting TICs just like every other type of property.  Many TIC buyers between 2003 and 2007 purchased their building with an 80% first mortgage and a 10% equity line or second mortgage, and now find their equity position of 10% is in grave jeopardy because their building has lost value.

Another problem TIC owners can face is an unexpected job loss and all the problems that go with that.  Even if the TIC partner is able to pay the monthly payments from savings, job loss can cause real problems when there is a need for the rest of the group to move on to complete the conversion or simply to take advantage of a lower interest rate.

As a TIC mortgage specialist, I am often asked, "What if my condo conversion is complete and I'm now ready to refinance into a separate condo loan, but one of my partners has lost his job?  What happens?  Do I need to wait until my TIC partner gets another job?"

According to TIC attorney Andrew Sirkin, the answer is "no".  Under most TIC agreements, any one of the TIC partners can force a sale simply be declaring (in writing) that they plan to refinance.  If the other partners are unable to participate in a new group loan, they must sell.  The same applies if one TIC partner wishes or needs to sell his unit; by declaring her intention in writing, and setting forth a timeline ("I will be selling my unit within 6 months"), the other owners will also be forced to sell if they cannot qualify to participate in a new loan with a new buyer.

Yes, this is a horrible result for the party who lost his job and now may face losing his home.  If the parties have enjoyed a good relationship in the past, one would hope something less harsh could be worked out.

If you are faced with this situation, please be sure to check your TIC agreement for details.