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By Olin Ericksen
Staff Writer
May 18 -- For some wealthier renters, buying an
apartment building together -- a method known as tenancy-in-common
(TIC) -- is a good way to get a first crack at home ownership,
but some City Council members worry the trend could lead to
a loss of rental housing.
Council members Ken Genser and Kevin McKeown -- long-time
members of the powerful tenants group Santa Monicans for Renters’
Rights -- last week asked the City’s legal staff to
return with more information about TICs and condominium conversions.
"We have to understand where we stand on condo conversion
issues and tenancy-in-common, which is new phenomenon in many
areas," Genser said. "In theory… it's a problem
that could affect rent control units."
Although statistics are not available for Santa Monica, because
the local Rent Control Board does not keep track of TICs,
The Lookout has learned of two cases where buildings
have been bought by tenants using the method, and City officials
suspect there are more.
Since the City no longer permits individual units to be converted
to tenant-owned condominiums, some City officials fear the
trend, which has been popular in San Francisco, where "condo
conversions" are also banned, could catch on.
As in San Francisco, TICs are an alternative to the State
Ellis Act, which allows apartment owners to go out of the
rental business, for landlords who may want to build condominiums.
Once a building is "Ellised" and residents relocated,
it can be torn down and redeveloped. But the process is onerous
and expensive.
As a result, TICs have caught on in cities such as San Francisco,
where smaller buildings have been bought by groups of tenants
with the owners’ help for nearly a decade, according
to housing experts.
Banks seldom finance tenants who wish to purchase buildings
larger than four units, because they must share the liability
and mortgage, experts noted.
But the trend may be losing steam in the Bay Area, where
the number of small apartment buildings with owners willing
to sell seems to be dwindling, according to reports in BeyondChron,
San Francisco’s alternative on-line daily.
Attorneys who help convert apartments into TICs may be looking
south to the Los Angeles area and cities such as Santa Monica,
whose tough tenant protections and high building costs make
it expensive to Ellis buildings, experts said.
TICs "are developers responding to legislation,"
said Chris Christensen, president and CEO of CondoConversions.com,
which helps developers steer through housing regulations.
"TICs are less favorable than a condo conversion,"
he said, noting that it is harder for several tenants to get
a bank loan than it is for a single person, even though as
TICs they are considered one entity, akin to a corporation.
Common ownership, however, is more favorable than "Ellising,"
because buildings taken off of the rental market must often
be torn down and completely rebuilt, the most expensive option.
"Sometime they have to scrape it off the lot entirely,"
said Christensen.
While it may be a group of tenants who band together to buy
the property as a TIC, tenants do not usually initiate the
process, Christensen said.
"The tenants have to be on board, but developers and
owners are the ones that develop the TIC and plan the strategy
usually," he said.
While the Rent Board researches the trend locally, Genser
and others are hoping to find out more about its legal status.
In city's such as Santa Monica, which does not allow condo
conversions, the legal issues could be more complicated than
in other California cities.
"Their legal status locally is uncertain is all I can
say," said City Attorney Marsha Moutrie, who is now researching
the matter for the council.
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