Legal Question in Real Estate Law in California
I am in a TIC with three other owners of a four unit residential building. We all entered into the TIC at different times and at different purchase prices. We have a TIC Agreement that stipulates we each have exclusive control over the unit we purchased and live in. Owners A, B, and C are on one loan and owner D is on a second mortgage and pays the seller directly, there is no loan.
One of the owners on the first mortgage has defaulted and can no longer pay their part of the loan and has moved out. A renter has been placed in the defaulting unit and the remaining owners are paying the difference. The unit is under water. The TIC Agreement stipulates the non defaulting owners can evict the defaulting owner and recover what is owed by selling the unit but since the unit is underwater the non defaulting owners can not recover any funds owed by a sale. The defaulting owner wants to transfer her ownership to the non defaulting owners and just walk away but we don't want the unit because it is underwater. If the we, the non defaulting owners accept transfer of defaulting owners title does that also take the defaulting owner off the Deed of Trust? In a TIC how does one owner transfer their interest to the other owners?
1 Answer from Attorneys
There is an old saying that if you lie down with dogs you'll wake up with fleas. The corollary in real estate is if you get in bed with TIC's you may wake up with a dog. It seems you are faced with a Great Dane in your defaulting co-tenant.
First, to answer your two direct questions directly: 1. Deeding the defaulting owner's title to the other owners would not get the defaulting owner off the loan. They would still be liable to the lender. Given that the lender made the loan to TICs, it may not even be an event of default, though you can't be sure without looking at the loan documents. 2. The way you transfer is you simply grant deed from ABCD TICs to ABD TICs. Alternatively C can give a quitclaim deed to ABD.
Neither of those facts/answers, however, really tells you what your options are and the ramifications and consequences of those options. Your situation is additionally complicated by D sitting out there with his/her own fiancial arrangments isolating him/her from both the liability for and rights and remedies arising out of being on the joint loan. In short, this is really to complicated to even begin to help you sort out in a free BBS forum. You really need to hire me or another experienced real estate and title attorney to help all three of you deal with the defaulting owner in a way that best protects your finances and homes.
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