What is a tenancy in common (TIC)?

The acronym "TIC", which stands for tenancy in common, along with the terms "cotenancy" and "fractional ownership", refer to arrangements under which two or more people co-own a parcel of real estate without a "right of survivorship". This type of co-ownership allows each co-owner to choose who will inherit his/her ownership interest upon death. By contrast, the type of co-ownership called "joint tenancy" requires that each co-owner's interest pass to the other co-owners upon death.

The TIC has become a popular style of ownership in many different real estate contexts. For example, income property investors and real estate syndicators are increasingly using tenancy in common as a vehicle to facilitate income tax-deferred exchanges, a trend that has been propelled by recent IRS rulings recognizing certain tenancy in common structures as legitimate vehicles for these exchanges. At the same time, vacation home buyers and resort developers are increasingly using tenancy in common (often called "fractional ownership" in this application) to share ownership and usage of vacation properties so that owners need not buy more than they can use and afford, but still get legal title to real estate (unlike in a traditional 'time share' arrangement).

This article will focus on a third common usage of tenancy in common which is the co-ownership of multi-unit property by co-owners who each wish to have exclusive usage rights to a particular area of the property. TIC owners own percentages in an undivided property rather than particular units or apartments, and their deeds show only their ownership percentages. The right of a particular TIC owner to use a particular dwelling comes from a written contract signed by all co-owners (often called a Tenancy In Common Agreement), not from a deed, map or other document recorded in county records. This type of tenancy in common co-ownership should not be confused with the legal subdivisions known as the "condominium" and the "stock cooperative", as discussed below.

What is the difference between a tenancy in common and a condominium?

In a condominium, property has been legally divided into physical parts which can be separately owned. Each condo owner owns a particular area of the property which is delineated on a map recorded in the public records, and has a deed which identifies the area which is individually owned. By contrast, TIC owners own percentages in an undivided property rather than particular units or apartments, and their deeds show only their ownership percentages. The right of a particular TIC owner to use a particular dwelling comes from a written contract signed by all co-owners (often called a Tenancy In Common Agreement), not from a deed, map or other document recorded in county records. The difference between physical division of ownership in county records (as in a condominium) and an unrecorded contract allocating usage rights (as in a tenancy in common) is significant from both regulatory and practical standpoints, as discussed below.

What is the difference between a tenancy in common and a cooperative?

In a "stock cooperative" or "co-op", a corporation or other legal entity owns the property, and the owners of that entity each hold shares of the entity along with usage rights to a particular apartment (often but not always expressed in a document called a proprietary lease). In most locations, a stock cooperative is legally recognized as a form of subdivision, and this recognition brings co-op ownership within the scope of most local subdivision restrictions and regulations. As a result, laws that restrict or prohibit the conversion of apartment buildings into legal subdivisions such as condominiums generally impose those same restrictions and prohibitions on the conversion of apartment buildings into stock cooperatives. In practice, this means that if you can convert to a co-op, you can also convert to a condo, and you would always choose the condo conversion over the co-op conversion because condos are easier to sell and finance. On the other hand, if it is burdensome or impossible to convert to a condo, the same difficulties will apply to a co-op conversion, but will not apply to TIC conversion. That is why people form tenancies in common rather than cooperatives.

Why have TICs become so popular?

As the price of real estate continues to rise, and communities adopt ever stricter growth and condominium conversion restrictions, more and more people are turning to tenancies in common and other non-traditional co-ownership structures as a way to maximize their buying and selling power. These arrangements lower prices and increase choice for buyers by allowing them to pool resources and buy more real estate than they otherwise could or would, while agreeing among themselves on an allocation of rights and responsibilities so each buyer does not end up with more than he/she needs. At the same time, tenancy in common arrangements increase sale prices and marketing options for sellers by allowing them to sell fractions of their property to buyers for prices that generally add up to more than what the seller would receive from a single buyer. The popularity of tenancies in common has been further enhanced by the recent introduction of "fractional loans" which allow co-owners to have individual mortgages, substantially decreasing the risk of co-ownership.

Why not form an LLC or limited partnership instead of a tenancy in common?

Limited liability companies (LLCs), limited partnerships, and corporations are entities that can provide a variety of management and liability protection advantages over direct fractional ownership arrangements such as tenancy in common. But for co-ownership groups who plan to occupy some or all of the co-owned property, the legal and tax disadvantages created by these entity structures generally outweigh the benefits. Specifically, under generally accepted interpretations of tax laws, owners of LLC memberships, limited partnership interests or corporate shares are not considered to own real estate (unless the entity qualifies as a stock cooperative), and therefore cannot claim the tax benefits of real estate owner-occupants such as the ability to deduct mortgage interest and property tax, and the ability to claim the $250,000/500,000 tax-free gain on resale. If the LLC, limited partnership or corporation can be deemed a stock cooperative, it is likely to encounter regulatory barriers as discussed above. Can a tenancy in common owner sell his/her own interest?

Each cotenant can sell his/her tenancy in common interest at any time and, contrary to what many people unfamiliar with tenancies in common assume, TIC interests have been readily re-salable for at least the past 10 years. Sales of TIC interests involving group loans are typically subject to rights of first refusal and buyer approval to insure that the co-owners can vet prospective buyers and make sure they are qualified. Marketability is enhanced if, by resale time, the group has a track record of solving its problems and paying its bills, greatly decreasing the buyer's risk. What legal restrictions apply to TIC formation?

The legal restrictions applicable to tenancy in common formation and ownership vary from state to state. In California, appellate courts have recognized a distinction between recorded and unrecorded documents assigning usage rights, and this distinction means that local laws restricting or prohibiting the conversion of apartment buildings into legal subdivisions such as condominiums do not apply to the creation of a tenancy in common arrangement so long as no document deeding or otherwise assigning usage rights is recorded in public records. Consequently, tenancy in common formation does not require any filing or approval with local governmental agencies (such as counties, cities or towns).

On the other hand, tenancy in common formation in California does require the approval of the California Department of Real Estate (DRE) if the property to be co-owned and occupied by the group contains five or more residential units. The DRE approval process currently takes 6-9 months to complete, and results in the issuance by DRE of a "Public Report" (often called a White Paper). The Public Report contains extensive information and disclosures about the property and the tenancy in common group, and must be given to all prospective buyers. Resale of tenancy in common interests are generally allowed without a Public Report, but the rules defining what constitutes a true "resale" (as opposed to a sham designed to circumvent approval requirements) are strict.

Over the years, San Francisco lawmakers have tried on various occasions to restrict or discourage tenancy in common formations indirectly. In each instance, these measures have proven to be ineffective or been rejected by the courts. The most recent effort (in 2001) attempted to make tenancy in common ownership more risky by making exclusive occupancy agreements (even unwritten or implied ones!) illegal and unenforceable. The law was held a violation of the constitutional right of privacy by the California Court of Appeal in 2004. The Court specifically recognized that strict constitutional limitations apply to the ability of government to interfere with co-owners' private internal arrangements relating to usage of their shared property, and stated that keeping owners and their apartment buildings in the rental housing business is not a sufficiently strong governmental interest to justify such an interference.

By: D. Andrew Sirkin
D. Andrew Sirkin is a recognized expert in co-ownership forms including condominiums, TICs, equity sharing and co-housing. He is an accredited instructor with the California Department of Real Estate, and frequently conducts co-ownership workshops for attorneys, real estate agents, corporations, and prospective home buyers. Mr. Sirkin's specialty is tenancy in common.

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One of the most common structures for law firms is a business partnership. There are many reasons why, but if you consider that it is probably the most difficult arrangement for doing business, you would think that attorneys - some of whom are the experts in the creation and dissolution of business entities - would avoid them. Yet this is not the case. In fact, some lawyers join and leave partnerships more often than some people buy new cars.

What is a partnership? A partnership is a voluntary relationship between individuals or entities, characterized by cooperation and responsibility and intended to focus on a common goal. It is a contract between competent persons for pooling their money, goods, labor and/or skill with the agreement that profits will be divided between them, and that they will use the partnership entity to conduct business for their mutual benefit.

In the qualitative sense, partnership is characterized by accord, affinity, collaboration, fraternization, support and friendship. Many law firms are known for being viable partnerships that work to represent the interests and skills of each shareholder in the best possible manner. Some firms even evidence that spirit of cooperation that makes a partnership incredible and fun - bringing profit and goodwill to all the participants, including staff and clients. This, obviously, is the ideal firm. However, firms do not usually start out that way, and many never even approach it.

Why do so many firms fall short of the ideal? The short answer, of course, is because there are humans involved. Nevertheless, it might be helpful to consider that the people who become attorneys have a determination that propels them into law school and to do what is necessary to pass the bar exam. This process of education and examination hones their innate drive into a focused, goal-oriented person. This places members of the legal profession among the most educated and trained in our society.

When a new lawyer passes the bar, what does the future hold? Often it is as an associate in a firm. This is where the real training begins. Associates are expected to be able to think on their feet, to do whatever partners do not want to do, to adapt to rigid rules of the court, and to substitute for other attorneys at the last minute with little opportunity to prepare and little knowledge of the case they are representing. All the while, order and decorum must be maintained. This training process helps them to become great client advocates and - when you add the billable hour expectations of many firms - it also builds their endurance (tolerance for pain). Over time, the process yields its likely product... an attorney with a "warrior" persona, prepared to subjugate their own needs in the service of their clients. This is the high and noble calling of the profession.

Concurrent with all this training, the internal motivation of the person continues to develop. While the qualifying process is taking place, their initial motivation, drive or vision is becoming strengthened as well. Often kept at bay with the promise of future rewards - partnership, private practice, social status and/or better-than-average compensation, this drive must come into self-expression. Goal-driven, status seeking and reward focused, the next logical step for many is either partner or private practice. The strength of character required is similar, but it is at this point that the challenges diverge. Our purpose here is to address the challenges facing the partners in firms. "Making partner" is a goal for most associates and, for them, it is as important - often more so - as marriage. Of course, it also brings all of the obligations, but very different rewards. Like the marriage ceremony, partnership brings on a new era - filled with new duties that have to do with the successful running of the firm itself and with meeting the expectations of the other partners. It is here that the groundwork is laid for the future of the firm.

Large firms have developed cultures that incubate associates to fit in. Those who do become partner. The others leave the firm. Smaller firms, however, are made up of lawyers who either did not fit into the mold of the larger firms or wanted more control over their destiny.

Law school friends, who trained in different firms and disciplines, may decide to begin a practice together. A few associates in a practice area of a large firm may opt to begin a boutique firm. Regardless of the course of their arrival, the attorneys who become the partners of small and medium firms, immediately face two new challenges in addition to the need to generate and service their own book of business - cooperation with the other partners to mutual objectives and fulfilling their share of the obligations of managing the practice.

However, nothing in their training has prepared them for meeting the shared, yet sometimes clashing interests and expectations of their partners. Law school does little to prepare attorneys for the business necessities of running a practice. Most law firms do not train the associates in it either. Up to the moment of becoming a partner, the attorney's career has been largely a solitary performance and the rewards have been commensurate with it. It is at this time that the repressed, but strong internal motivators - combined with the "warrior" persona tend to rise to the surface. Without the training for business, this personality does not bend easily toward cooperation - even when appropriate and beneficial to his or her own interests.

Partnerships are formed for a variety of reasons, usually based more on hope than research. As partners, financial rewards are based upon the shared performance of all partners. However, often the partners do not share the same objectives or circumstances. Sometimes the approach to fees is similar. Other times it is drastically different. Firms are founded where the partnership may consist of a litigator, a family practice attorney, a personal injury lawyer and an insurance specialist. In firms like this, the issue of how to compensate the partners becomes a major issue due to the differences in cash flow and funding requirements. Even in boutique firms where fee structures are not a concern, the necessity of managing the practice still exists. Determining who is best suited to handle the various issues of conducting the regular business of the firm; hiring, managing and terminating staff; and keeping the books is not an option, but a requirement.

In these situations, the responsibilities may be parceled out, but usually little reward is given for doing the management work. In smaller firms, rainmaking is power. The best rainmaker often shirks other responsibilities because it is necessary to bring in the cash to keep the firm operating. The other partners end up carrying more of the management load. This means their opportunities to bring in new cases further declines. Soon, non-alignment, resentment and disrespect set in.

Combine that with the warrior inclination and the lack of training in cooperative communication and you have fertile ground for growing troubles. This is often complicated by the inability of the partners to find convenient times to discuss the issues, so they get put off and the resentment may turn into discord or repressed hostility. If one of the partners is particularly successful in bringing in cash, resentment and discord quickly become antagonism and outright warfare. These are the antithesis of true partnership.

Recognition, Resolution and Growth All firms must face these challenges at one time or another. The largest firms have confronted them and designed solutions to address them, enabling growth and prosperity for partners with a divergence of talent and skills. Smaller firms have a harder time due to the perception of a lack of time and funds to overcome the problems.

The keys to passing through this phase: recognition, telling the truth about it, a commitment to the growth of the firm above self-interests, communication with your partners so that everyone wins, finding the right combination of new business generation, client service, firm management and partner relations.

Unfortunately, there is no guaranteed winning formula. Each partnership must face the challenges and design its own solutions. Generally, when mutual respect and acknowledgment of the value of all aspects of work done for the firm are the rule, solutions can be designed to enable firms to grow beyond these difficulties. As with most things, the earlier that this is recognized and accomplished, the greater the likelihood of success and growth.

By: Dennis McCue
Dennis McCue, a Certified Management Consultant, is Principal of Dynamic Firm Management, dedicated to making law firms more successful. To reach him, call 949-640-2220 or visit: www.dynamicfirm.com.

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Robbery is a felony, punishable by a term in state or federal prison.
Robbery is the direct taking of property, including money from a person through force, threat or intimidation. "Armed robbery" involves the use of a gun or other weapon which can do bodily harm, such as a knife or club, and under most state laws carries a stiffer penalty (longer possible term) than robbery by merely taking. Robbery is separated into degrees, which may mean stiffer penalties.

First degree robbery occurs where the defendant acts in concert with two or more other people for the purpose of committing a robbery in an inhabited dwelling house, vessel designed for habitation, trailer coach, or the inhabited portion of any other building. Robbery in the first degree is a felony, punishable by imprisonment in the state prison for 3, 6, or 9 years. In all other inhabited structures not defined above, the punishment is imprisonment in the state prison for 3, 6, or 9 years.

Second degree robbery encompasses all other types of robbery, which are punishable in the state prison for 2, 3, or 5 years.

California Penal Code Section 211 defines robbery, which reads:

“Robbery is the felonious taking of personal property in the possession of another, from his person or immediate presence, and against his will, accomplished by means of force or fear.”

“Immediate Presence” means an area within the alleged victim’s reach, observation or control, so that he or she could, if not overcome by violence or prevented by fear, retain possession of the subject property. CALJIC 9.40

“Against the will” means without consent. CALJIC 9.40

California Penal Code Section 212 defines the “fear” that is required to be convicted of robbery:

“1. The fear of an unlawful injury to the person or property of the person robbed, or of any relative of his or member of his family; or, 2. The fear of an immediate and unlawful injury to the person or property of anyone in the company of the person robbed at the time of the robbery.”

By: Darren Kavinoky
www.nocuffs.com

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A durable power of attorney is much like a normal Power of Attorney except that it continues to remain in effect even when the principal loses his or her mental faculties and thus becomes incapable of sound reasoning. Unless, and until, the power of attorney has been made durable, it will become ineffective in the event of the principal becoming incompetent.

Thus, it follows that if the power of attorney is not durable, it would result in the family of the principal having to approach the courts to appoint a guardian or conservator over the assets of the principal.

What differentiates a normal power of attorney from a durable power of attorney is the presence of a phrase such as "This power of attorney shall not be affected by subsequent disability or incapacity of the principal". The presence of such a phrase shows the intent of the principal that the authority that he is giving shall remain in force even if his mental health deteriorates beyond control.

To make a power of attorney durable, it is subject to certain state laws. The Uniform Durable Power of Attorney Act has taken force in as many as 48 states in the US.

There are two requirements to a durable power of attorney. The first is that it shall be in writing and the second that it contain words to the effect that the power of attorney shall remain in effect even in the event of the principal becoming mentally incapacitated. Even though the Uniform Act does not specify that the agreement be notarized, most such documents have space for the notary's signature.

A lot of states require that the agreement be notarized, especially in real estate matters. In addition, some states even require that the document be witnessed.

It is wise to have such an arrangement even if the Principal and their spouse own everything jointly. In the event the principal becomes disabled, the spouse can still sign checks and withdraw money from jointly held bank accounts, but is unable to sell jointly held property or stock without the signature of the principal.

In addition, the spouse is unable to change the name of a beneficiary to a life insurance policy or retirement benefit plan. Even though the principal holds everything jointly, it is wise for him or her to execute a durable power of attorney.

To revoke this type of agreement, the principal has to be of sound mind at the time of revocation. The revocation must be written and should be sent to the agent and to third parties, like banks. A conservator appointed by the court may also revoke the agreement.

Under normal circumstances, the durable power of attorney may have very broad terms of reference i.e. the principal may authorize the agent to do any and all things. However, there are cases when the agreement shall only confer specific rights to the Agent. The main advantages of having this type of agreement are:

* You have someone to look after you in the event of mental incapacity * You, not the court, selects the agent * You save time and expense of not having to go to court

By: Wade Anderson, a CPA who operates DigitalWorkTools.com Legal Forms and Business Documents.

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