Co-owners of a property who hold the Tenants In Common (TIC) status might consider condo conversion if they need flexible ownership or better asset marketability. The TIC-to-condo conversion gives each co-owner sole ownership, financing, and occupancy rights to their unit while creating a clean ownership structure that may boost property value.
But how much does it cost — and is it worth it?
This article outlines what property owners should expect from this strategy while evaluating its place within their investment objectives.
Why Convert a TIC Into a Condo?
TICs create situations where multiple owners possess shared ownership rights to one entire property. While each owner holds a defined fractional interest, there is typically no legal allocation of exclusive rights to specific units or areas unless defined by a separate agreement. This situation can result in:
- Financing limitations
- Disputes over management or use
- Challenges with refinancing or selling
Changing the property into a legal condominium structure grants each co-owner exclusive unit ownership and combined common area interests. The conversion process may help:
- Sell individual units
- Obtain traditional mortgages
- Reduce legal and operational friction.
While each owner holds a defined fractional interest, there is typically no legal allocation of exclusive rights to specific units or areas unless defined by a separate agreement.
What Are the Costs?
A TIC-to-condo conversion expense depends on several factors, including location, size, legal complexity, and municipal requirements. The following general cost range estimates what property owners should expect.
|
Expense Category |
Estimated Range |
|
Legal Fees |
$5,000 – $20,000+ |
|
Surveying and Architectural Plans |
$3,000 – $15,000 |
|
City/County Filing Fees |
$2,000 – $10,000+ |
|
Title Reports & Insurance |
$1,500 – $5,000 |
|
Property Inspections |
$1,000 – $3,000 |
|
HOA Formation & Docs |
$2,000 – $8,000 |
|
Total (Est.) |
$15,000 – $60,000+ |
Actual conversion costs will vary depending on location, property type, and legal complexity. In higher-cost markets such as San Francisco, Los Angeles, or New York, expenses may be significantly higher due to detailed planning reviews, permit requirements, and zoning regulations.
Who Pays for the Conversion?
Most of the time, all TIC owners divide the expenses equally or according to their ownership percentage. The process requires complete agreement from all owners.
Challenges to Consider
- Local laws frequently prevent conversion procedures, mainly when applied to rent-controlled and affordable housing areas.
- All owners must agree on the process, timeline, and shared expenses.
- The conversion process leads to changes in property tax assessments and modifications to the legal status that affect zoning and insurance coverage.
Considering Alternatives to TIC Ownership?
For some property owners, the Delaware Statutory Trust (DST) may be an alternative worth exploring. DSTs offer fractional ownership in institutional real estate and are structured to provide passive income potential with centralized, professional management.
At Realized®, we assist property owners in determining if either a TIC-to-condo conversion or a DST exchange may align with their financial, tax, or estate planning objectives.
Considering the dissolution of your TIC property?
We will explain your property exit options and how each may support your broader planning goals.
The tax and estate planning information offered by the advisor is general in nature. It is provided for informational purposes only and should not be construed as legal or tax advice. Always consult an attorney or tax professional regarding your specific legal or tax situation.
