People who own a residential structure in San Francisco as tenants in common are able to convert their buildings into condominiums under certain circumstances. This municipal program is known as the Expedited Conversion Program (ECP). To qualify, a building must contain 6 or fewer units, be at least partially owner-occupied, meet length of occupancy requirements, and have a written tenancy-in-common agreement in place as of April 1, 2013.
The situation is legally complicated because San Francisco severely restricts both the construction of new condominiums and the conversion of older buildings to condominiums. This has resulted in keeping the cost of condos much higher than the cost of apartment buildings.
In addition, structures owned by more than one person as tenants in common (TICs) can often be converted into condos after a period of owner-occupancy. The conversion is done voluntarily by the TIC owners at a later date. While other Bay Area communities do not restrict condo conversion as much, it is usually much more expensive to create the copious documentation necessary for a condo conversion than for a TIC.
In California, a condominium is a form of subdivision 1 that is regulated by California state and local San Francisco codes. For the purposes of condominium conversions, San Francisco recognizes married people and domestic partnerships as a single entity, not two separate people.
In order to qualify for conversion, residential buildings must have at least 2 and no more than 6 units in them. If there is a commercial unit or commercial units, these units become commercial condominiums when the map is recorded.
The building is then considered to be a mixed-use condominium property. Apparently the process of converting a building to a condominium is completed according to numerous laws and regulations, so it is recommended that a person hire an attorney for help with the process of completing a conversion.
Conversion may be accomplished in 1 of the 3 ways:
- Automatic qualification via a lottery bypass
- Expedited conversion program
- Annual conversion program.
Buildings with an eviction history may not qualify for condominium conversion. For example, an apartment building that is owned by several owners in a tenancy in common might not qualify for condominium conversion because the structure has a history of evicting occupants who were renters.
What Is a Tenancy in Common?
A tenancy in common (TIC) is simply a form of ownership of real property in which more than 1 person owns a piece of real estate. Each owner has an undivided interest in the property that they own in common with others. Each owner has an equal right to occupy a structure that is owned in common with others.
Often, however, the owners have a side agreement to the effect that each owner is entitled only to occupy a single unit in a multi-unit building. The owners usually maintain joint liability and have one mortgage for which they are all responsible.
Tenancy in common is a popular way for two or more people to own real property. As noted above, it offers the owners equal access to the property. It is a form of ownership that is most popular among close friends, domestic partners and business partnerships who anticipate sharing a structure or piece of property.
The owners of a TIC usually also have unequal share interests. Each owner may sell their share at any time. Also, the stake of a deceased owner passes to their heirs. However, starting in the 1990s, San Francisco changed the definition of a TIC to mean that each owner has bought an interest that gives them the right to exclusively occupy a unit in a multi-unit structure. There is an unrecorded written agreement between the owners to enforce this new definition.
Generally, owners of a TIC share the obligation to pay their mortgage, property taxes, and maintenance costs of their property. If one owner fails to pay their share, then the other owners must cover the defaulting owner’s share of the costs. Otherwise, the property may go into foreclosure, and every owner will lose their undivided interest in the property.
What Are the Benefits of a Condo?
Each condominium in a condominium community is considered a separate property. Generally speaking, the financial obligations of one owner may not become the obligation of another owner. The exception to this would be if one owner does not pay their periodic condo fees.
However, when it comes to mortgage obligations, if one unit is going through foreclosure, the other units are not involved. There is no risk that they will lose their property or have to repay the debt of the owner who defaults on their mortgage.
Moreover, a conversion to a condo may have the effect of increasing a property’s value, because the financial liability of each owner may be lessened.
Qualifications for Converting a TIC to a Condo
As noted above, buildings with 2 to 6 residential units qualify for conversion. Conversion may completed in 1 of the 3 ways:
- Automatic qualification via lottery bypass
- Expedited conversion program
- Annual conversion program
Again, buildings with an eviction history may disqualify the conversion
What Is the Conversion Process?
To start the process of converting a TIC to a condominium, the owners of the TIC or their attorneys need to go to the San Francisco Department of Public Works to do the following:
- Request an inspection of their property
- Get a survey map of their property from a land surveyor
- Prove occupancy with a sworn statement
Afterward, the homeowners may submit an application for conversion. The application must include a Covenants, Conditions, and Restrictions (CC&R) document. The CC&R for a condominium comprise a technical legal document that may consist of many pages. It becomes the governing document for the condominium. This is not a document that a lay person should draft for themselves. It requires the services of a professional real estate lawyer.
The CC&R is a complicated legal agreement that must establish a homeowners association and the association’s processes for governing the association. That is because a homeowners association is a type of government for a community of people who own units in a condominium. It collects money from the unit owners and then must be spent to maintain the structure that houses the condominium units.
In addition, in a condominium structure, there are 2 or more units. Each person owns a single unit. A person may own one or more than one. However, the owner of a unit has the exclusive right to occupy their unit or units. A person may own a unit with another person in some form of joint ownership, but the owner of one unit does not have the right to enter or occupy the unit of another unit.
All owners would have an equitable right to occupy and use common areas. This would all be specified in the CCR document.
Do I Need the Help of a Lawyer for Converting a TIC to a Condo?
Due to the complexity of the paperwork and the legal documents required to convert a TIC to a condominium in San Francisco, property owners should use real estate attorneys in San Francisco 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 because the CC&R were poorly drafted CC&R. LegalMatch.com can quickly connect you to an experienced attorney who can take care of all the technicalities of applying and setting up a condominium structure.
