Tenancy in Common:A risky solution to Jackson’s housing market

Wednesday, December 19, 2007

By Sam Petri

Jackson Hole, Wyo.-Get in. That’s what any Jackson Wyoming realtor will tell you about the real estate market. And it’s no secret: home values in Teton County continue to rise at a rapid rate. If you can manage to break into the market, you’re bound to make money, as there is limited supply and infinite demand. But getting in requires purchasing power, which first-time homeowners lack.

Some area residents are establishing “Tenancy in Common” agreements in order to crack the market. In this scenario, several people pool their resources and purchase any property they can - together. The process requires trust in your partners, as the agreement can turn into a nightmare if entered into with the wrong people. It also requires a lawyer. For non-homebuilders looking to purchase an existing home, creating a Tenancy in Common agreement that divides the property equally amongst partners is a clever but risky way to buy into Jackson’s exclusive housing market.

Tenancy in Common (TIC) owners purchase a percentage of an undivided property, like a single family home, with a group of people. The agreement outlines the rights of each individual investing in the property and lessens (but doesn’t eliminate) the likelihood of financial backstabbing, some parties jumping ship, and the thousands of other headaches that can happen when everyone owns a piece of the same thing.

“If somebody were to come to me with that kind of a project, my head [would be] almost spinning with all the potential risks involved,” warned David Clauss, a local real estate attorney. However, he did allow, “In the right circumstances it could make a lot of sense. I would put emphasis on the right circumstances, with a special collection of people. You’d want to be sure everyone had financial backing and you’d want to resolve a lot of issues in advance.”

Joaquin Hanson, a real estate attorney and President of Jackson Hole Title and Escrow, claimed that purchasing a house through TIC is not that unusual in any market. “Let’s say three guys from Chicago want to buy a rental property,” he said. “They just put in each of their names as tenants in common on the title…you just get one mortgage.” He cautioned that anyone considering this should know who their partners are before signing on the dotted line. “It’s not a bad idea, but would you do that? It goes back to your relationship more than anything else.”

“If you want to get a loan,” said Mark Hassler, VP Mortage Lending at the First Bank of Tetons, “everybody should apply who wants to be on the title, so that they can bring everything to the table.” Hassler said that including all the people who wish to be on the title on the loan application can bring strength to the overall package. 

In the end, all parties share the burden of a common debt. If one person defaults on their share of the mortgage, all parties will share bad credit. If everyone pays their bills on time, all parties will establish good credit. Constructing a solid TIC agreement that tackles issues of default, exit strategy and death is essential in making a group purchase work.

Hassler noted that TIC agreements are commonly made amongst family members. “I’ve heard of as many as eight family members on one title,” he said. While that kind of group agreement occurs more often than one amongst friends, “The facilities are there,” he said. “TIC is one way of titling the property, but it’s riskiest for legal complications.”
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Tenancy in Common:A risky solution to Jackson’s housing market | Planet JH News Article: Development

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