What happens if an owner in a TIC structure faces financial hardship?
If an owner cannot make their payments, the group should follow the process in its TIC agreement, protect essential property payments, and document any temporary support. If the hardship continues, selling or transferring the owner’s interest may be the best next step.
Financial circumstances can change. If an owner is having trouble making their required payments, the most important step is to tell the group as early as possible. Early communication gives everyone more time to understand the situation and explore practical next steps before a missed payment affects the property.
What happens after a payment is missed?
The group should follow the notice and payment-default process in its TIC agreement. Depending on the agreement and the circumstances, this may include:
- Providing written notice of the missed payment
- Allowing the owner a specified period to catch up
- Documenting any amounts another owner pays on their behalf
- Exploring a temporary payment arrangement
- Discussing whether the owner should sell or transfer their interest if the hardship is likely to continue
Covering another owner’s payment does not automatically increase the paying owner’s ownership percentage. Any reimbursement, ownership change, or transfer should be handled according to the TIC agreement and documented with appropriate professional guidance.
What if the payment affects the mortgage or other essential property expenses?Mortgage payments, taxes, insurance, utilities, and other essential expenses still need to be paid on time. If the affected owner is also a borrower, the loan documents determine their responsibility to the lender. A TIC agreement generally cannot change the lender’s rights or release a borrower from the loan.
Depending on how the loan is structured, a missed mortgage payment could affect other borrowers, including their credit, even if they paid their individual shares. The group should contact the loan servicer promptly if a mortgage payment may be missed and speak with qualified legal and financial professionals before making long-term arrangements.
What if the owner cannot recover financially?
If the hardship continues, the TIC agreement may provide a structured path for the owner to sell or transfer their interest. Any transfer may be subject to the agreement, lender requirements, applicable law, and the group’s established process for evaluating and approving a proposed buyer.
The goal is to address the problem early, protect the property, and give everyone a clear process to follow without making assumptions about the owner or their circumstances.
This information is provided for general educational purposes and is not legal, tax, lending, or financial advice. The appropriate response will depend on the TIC agreement, loan documents, applicable law, and the specific circumstances. Owners should consult qualified professionals before taking action.
