How to Split a Multifamily Property Into TICs

Written By Lucas Beard

Start by confirming the building is a good TIC candidate

Before ordering documents, confirm what the city recognizes as legal residential use. The number of rooms currently used as homes is not always the number of legal units.

For a San Francisco property, obtain a current Report of Residential Building Record, commonly called a 3R report. Review the Department of Building Inspection records, permits, complaints, certificates of completion, and any notices of violation. In Los Angeles, the comparable starting point is generally a 9A report. Other jurisdictions use different property records.

Also review:

  • Current title and the entity holding title

  • Existing loans and whether the lender will permit partial releases

  • Unit legality and permit history

  • Tenant, buyout, and eviction history

  • Building condition and deferred maintenance

  • Insurance availability

  • Property taxes and commonly metered utilities

  • Parking, storage, yards, decks, and other areas that may be assigned for exclusive use

  • Whether the intended buyers will use fractional TIC financing

A title, loan, tenant, or permit issue discovered late can delay the entire offering.

Preferred TIC legal vendor: Sirkin Law

SirkinLaw APC is TurboHome’s preferred legal vendor for TIC formations. The firm focuses on occupancy-based TIC agreements, fractional ownership, developer offerings, and California DRE approval for larger TIC projects.

Bring TIC counsel into the project before marketing materials, purchase contracts, allocation plans, or financing terms are finalized. The legal documents must agree with the title structure, unit assignments, budget, survey or diagram, purchase contract, and lender requirements.

Buildings with four or fewer units

California’s Subdivided Lands Act generally does not require a public report for the creation and sale of four or fewer undivided TIC interests. Sirkin Law’s legal overview describes four-or-fewer-share projects as outside the public-report requirement that applies to larger offerings.

That does not mean the project is informal. A properly formed small-building TIC still needs coordinated legal, title, financing, building, and sales work.

Typical four-or-fewer-unit process

  1. Confirm legal unit count and use. Review the 3R or local equivalent, permits, plans, complaints, and certificates.

  2. Review title and existing financing. Confirm the owner of record and determine whether the current lender will permit TIC sales, partial releases, or replacement financing.

  3. Set the proposed ownership percentages. Allocate percentages using unit value, size, amenities, parking, outdoor space, or another documented method.

  4. Map exclusive occupancy rights. Identify the unit, parking, storage, yard, deck, roof, and other spaces assigned to each TIC interest.

  5. Prepare the TIC agreement. The agreement should cover occupancy, expenses, taxes, insurance, repairs, voting, defaults, transfers, leasing, dispute resolution, and casualty loss.

  6. Prepare the purchase and financing documents. Coordinate the purchase contract, disclosures, fractional loan documents, and any partial-release mechanics.

  7. Prepare a building budget. Allocate shared expenses, utilities, insurance, maintenance, and reserves.

  8. Complete inspections and disclosures. Give buyers a clear picture of the entire property, not only the unit they will occupy.

  9. Launch marketing and sales. Make sure listing language matches the legal documents and does not describe the TIC interest as a condominium or separate parcel.

  10. Close each interest through coordinated escrow and title. Record the ownership transfers and any memorandum or covenants required by counsel.

Core documents for a smaller TIC

The exact package depends on the building and financing structure, but it commonly includes:

  • Tenancy-in-common agreement

  • Memorandum of agreement or recorded maintenance, nonpartition, and property-tax covenants

  • Exclusive occupancy and common-area exhibits

  • Ownership-percentage schedule

  • Building budget and expense allocations

  • Purchase contract, addenda, and disclosures

  • Financing explanation and financing disclosures

  • Sample note and deed of trust, if applicable

  • Partial-release agreement and deed-of-trust addendum, if applicable

  • Entity authorization documents for the owner or developer

Even when no DRE public report is required, the documents should be prepared and reviewed by experienced TIC counsel.

Buildings with five or more units

Five-plus-unit TIC projects follow a different regulatory path. The California DRE’s TIC Guidelines state that undivided interests coupled with exclusive occupancy rights in a parcel containing five or more legal units constitute an undivided-interest subdivision when at least one unit is residential.

The initial marketing or sale generally requires a public report. The rule can apply based on the legal unit count even if the developer initially plans to sell fewer than five interests. Do not begin marketing, take reservations, or use unit-specific sales language until DRE counsel confirms what the project may legally do.

The application is generally made through the DRE’s Notice of Intention for a Common Interest Subdivision, RE 624. The DRE processes TIC filings similarly to common-interest subdivision filings even though a TIC is not a condominium.

A land surveyor is required

For a five-plus-unit TIC, engage a land surveyor early. The DRE TIC Guidelines permit the parcel diagram to be prepared by an engineer or land surveyor, but TurboHome’s recommended project workflow uses a land surveyor. The diagram should show parcel boundaries, building dimensions, common areas, and the individual dwelling spaces with enough detail to show how possessory rights will be allocated.

The survey or diagram must align with:

  • The TIC agreement

  • Unit numbering and occupancy assignments

  • Parking, storage, decks, yards, and other exclusive-use areas

  • The purchase contract and exhibits

  • The 3R, 9A, or local property report

  • Marketing materials

  • Title and financing documents

Inconsistencies between documents are a common source of DRE questions and delays.

Documents required from the developer for a five-plus-unit TIC

The following is an initial working checklist. It is not all-inclusive, and the DRE may request additional documentation after reviewing the project. Use current forms and confirm every requirement with Sirkin Law, the DRE consultant, budget preparer, title company, and surveyor before filing.

1. Formation documents for the entity in title when the public report is issued

Provide the formation and authorization records for the entity holding title:

  • LLC: LLC-1 and operating agreement. If the managing member is another entity, provide formation documents for each sub-entity until reaching the individual person or people authorized to sign.

  • Corporation: Corporate resolution authorizing the signer of DRE documentation.

  • Partnership: LP-1 and partnership agreement.

  • Trust: Certificate of trust or trust agreement.

  • Out-of-state entity: Secretary of State documentation authorizing the entity to do business in California.

2. Sample purchase contract

Provide a completed sample-form purchase contract, including all exhibits and addenda. Obtain it from the realtor or DRE attorney.

3. HOA budget and applicable DRE forms

Provide the HOA or building operating budget and applicable forms, including RE 624A and RE 611A when required. If there have not been any sales in the subdivision, obtain the package from the budget preparer. The DRE’s current application should be checked for the exact forms required for the project.

4. Reserve study

Provide a reserve study covering major shared components and anticipated repair or replacement costs. For an existing project, the DRE may also request current association financial information and reserve funding disclosures.

5. Exterior elevated elements report and invoice

If the building contains exterior elevated elements, provide an exterior elevated elements report and the related invoice. Examples may include balconies, decks, stairs, walkways, and similar load-bearing components. Ask the budget preparer or attorney whether the project requires this report and for qualified provider referrals.

6. Roof certification

If the roof is at least ten years old, provide a certification prepared by a roofing company. It should describe the roofing materials, average life expectancy, and current condition. The certification should be on the roofing company’s letterhead and signed.

7. Twelve months of common utility bills

Provide twelve months of gas, electric, and water bills for commonly metered utilities.

8. Two years of financials

Provide two years of operating financial statements, or financials from the date the ownership entity began operating the building if that period is shorter.

9. Natural hazard and current tax report

Provide a natural hazard disclosure and tax report for the current tax year. The project intake checklist identifies Geo Assurance as an available provider and notes that ORT can order the report with a check payable to Geo Assurance for $89. Confirm the accepted provider, price, payee, and ordering instructions with the DRE filing team before sending payment because vendor pricing can change.

10. Current local property report

Provide a current 3R report for San Francisco, a 9A report for Los Angeles, or another report from the applicable local agency confirming that the property is authorized for residential use for the number of interests being offered.

The DRE TIC Guidelines specifically state that San Francisco’s 3R report can serve as evidence that the parcel is permitted for the number of residential interests offered.

11. DRE filing fees

The DRE’s current Subdivision Filing Fees schedule, RE 605, lists the common-interest subdivision final public report fee as:

  • $3,000 basic filing fee

  • $15 per unit or interest

  • $500 additional fee for a preliminary public report

  • $1,000 additional fee for a conditional public report

Fees may be paid by check payable to the Department of Real Estate or, when accepted for the filing, by credit card using DRE Form 909. Fees and forms can change. Do not remit fees until the filing professional requests them and confirms the current amount and payment method.

Documents prepared by the attorney

Sirkin Law or other qualified DRE counsel will determine the final legal package. Initial attorney-prepared documents commonly include:

  • RE Form 648 and the tenancy-in-common agreement

  • Memorandum of agreement or declaration of property-tax, nonpartition, and maintenance covenants

  • Articles of incorporation, if used

  • Bylaws, if used

  • Purchase contract with exhibits and addenda

  • Financing disclosures

  • Explanation of financing

  • Partial-release agreement and addendum to deed of trust, if applicable

  • Sample note and sample deed of trust, if applicable

The TIC agreement must identify which owner has the right to occupy each unit, explain how property taxes are apportioned, and establish workable rules for management, maintenance, expenses, transfers, defaults, and dispute resolution.

Additional five-plus-unit filing work

A complete DRE package may also require:

  • Preliminary title report

  • Evidence of the subdivider’s authority to sign

  • Escrow instructions

  • Lien and partial-release arrangements

  • Insurance information

  • Common-area completion arrangements

  • Current financial statements and bank records

  • Buyer disclosures

  • Advertising and promotional materials

  • Draft public-report language

  • Address labels and filing copies

  • Inspection or building-safety reports required for the property

  • Responses to DRE deficiency notices

The DRE’s Subdivision Public Report Application Guide and Suggestions for Subdividers emphasize consistency across the application, governing documents, budget, construction statements, escrow instructions, plans, parking, and exclusive-use assignments.

Who should be on the project team?

A five-plus-unit TIC formation usually requires more coordination than a conventional building sale. Assemble the team before the filing begins:

  • TIC and DRE attorney: Sirkin Law is TurboHome’s preferred legal vendor.

  • Land surveyor: Prepares the DRE-required parcel and occupancy diagram. The DRE guidelines also permit an engineer to prepare the diagram.

  • DRE consultant or filing specialist: Organizes the application and manages DRE comments.

  • Budget preparer and reserve specialist: Prepares the operating budget, reserve study, and related forms.

  • Title and escrow: Reviews vesting, liens, transfers, and closing mechanics.

  • TIC lender: Structures fractional buyer financing and any developer-loan partial releases.

  • Insurance adviser: Confirms master and owner-level coverage.

  • Roofing and building professionals: Prepare condition reports and certifications.

  • Real estate agent: Coordinates pricing, disclosures, purchase contracts, and compliant marketing.

Assign one person to maintain a master project list. Every professional should work from the same unit numbering, ownership percentages, diagrams, and version-controlled documents.

Common mistakes that delay a TIC formation

Marketing too early

A developer should not market five-plus-unit TIC interests before counsel confirms DRE compliance and the applicable public-report status.

Treating the TIC like a condominium

A TIC interest is an undivided percentage of the parcel with contractual occupancy rights. Marketing and purchase documents should not promise a separate legal unit or parcel.

Waiting to involve the lender

The existing mortgage may not allow partial releases. Buyer lenders may also require specific TIC agreement and title provisions.

Using inconsistent unit assignments

The survey, TIC agreement, budget, purchase contract, title documents, parking plan, storage plan, and marketing materials must tell the same story.

Ignoring legal-unit records

An unauthorized unit can affect the number of interests that may be offered and the DRE’s review. Confirm legal use before fixing the project structure.

Underestimating reserves and repairs

A weak budget or incomplete reserve study can create buyer concerns and DRE questions. Address known roof, exterior, structural, and common-system needs honestly.

The bottom line

Splitting a multifamily property into TIC interests is a legal and financial structuring project, not merely a change in listing strategy.

For buildings with four or fewer legal units, the process is generally faster and centered on the TIC agreement, title, financing, allocations, disclosures, and coordinated closings.

For buildings with five or more legal units, plan for DRE approval, a public report, a land surveyor, a reserve and budget package, building-condition documentation, local proof of legal use, and a larger set of legal and financing documents.

Start with experienced TIC counsel before spending money on plans, contracts, or marketing. Sirkin Law is TurboHome’s preferred legal vendor for this work.

Planning a multifamily TIC project? Talk with TurboHome about project positioning, unit sales, buyer financing, and the professionals needed to move the offering forward.

This article is for general educational purposes and is not legal, tax, lending, surveying, engineering, or DRE filing advice. Laws, forms, fees, and agency interpretations can change. Consult qualified professionals about the specific property and offering before marketing or selling any TIC interest.

Frequently asked questions

Does a TIC formation create separate legal parcels?

No. Each buyer owns an undivided percentage interest in the entire parcel. Exclusive occupancy rights come from the TIC agreement and related documents, not from a separately mapped condominium unit.

Does a four-unit TIC need a California DRE public report?

The Subdivided Lands Act generally does not require a public report for four or fewer undivided interests. The project still needs qualified legal, title, financing, disclosure, and building review.

Does a five-unit TIC need a DRE public report?

Generally, yes. The DRE treats an offering of occupancy-based TIC interests in a property containing five or more legal units as an undivided-interest subdivision when at least one unit is residential. Specific exemptions and resale rules should be reviewed by DRE counsel.

Why does a five-plus-unit TIC need a land surveyor?

The DRE TIC Guidelines require an engineer- or land-surveyor-prepared diagram showing parcel boundaries, building and common-area dimensions, and the dwelling spaces needed to explain each buyer’s possessory rights. TurboHome recommends using a land surveyor for this part of a five-plus-unit project.

When can a developer begin marketing five-plus TIC interests?

Do not begin marketing until DRE counsel confirms that the offering has the required public report or other legal authority. The timing can differ for preliminary, conditional, and final reports.

Sources and project resources

Lucas Beard
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