How do individual TIC loans (“fractional financing”) work?
Individual tenants in common financing is separate loans for each fractional owner. Each loan involves a note signed only by the owner of a particular tenancy in common interest, secured by a deed of trust covering only that owner’s TIC share. If a particular owner defaults on his/her loan, the lender can foreclose on only that owner’s share. The foreclosed share is then sold, and the buyer acquires the defaulting owner’s interest. Unlike with group financing, none of the other tenancy in common owners are affected by the default or foreclosure. Individual tenancy in common financing is not the same as individual condominium financing, and does not turn a SACO tenancy in common interest into the equivalent of a condominium. Since a TIC owner does not have title to a particular unit, an individual TIC loan cannot be secured by a particular unit or suite. So just as TIC owners rely on a contract (the unrecorded TIC Agreement) rather than a deed for their right to occupy a particular apar
