I have three different TIC questions, and on each of which I would like some insight:

 1) Can a TIC be collateralized?

2) How could the LLC be set up in order to include children for their benefit of TIC ownership upon death?

3) If liquidation of the TIC is necessary prior to the end of the holding period of the investment, can a partial sale be done, or must it be full?
 

OakRiver1:

I have three different TIC questions, and on each of which I would like some insight:

 1) Can a TIC be collateralized?

I'm not sure what you mean here.  Are you asking if you can use the TIC as collateral for other borrowing purposes?  The answer may vary from TIC property, TIC Sponsor and TIC Lender. 

Generally, the loan arranged by the TIC Sponsor for the TIC property is of course collateralized by the TIC property.  The terms of this loan will usually prevent you from using your interest in the TIC investment as collateral for any other purposes.  It's generally referred to as a "bad boy" provision or carve out that would render the non-recourse provision void and you would be liable for the loan.  Did that answer the question. 

2) How could the LLC be set up in order to include children for their benefit of TIC ownership upon death?

Generally, it can't.  The limited liability company (LLC) must be a single member LLC, especially if you are going to 1031 exchange into the TIC investment and want to 1031 exchange out of the TIC investment at the back end when the TIC property is sold. 

3) If liquidation of the TIC is necessary prior to the end of the holding period of the investment, can a partial sale be done, or must it be full?

Theoretically, yes.  However, the actual guidelines will be driven by the TIC Agreement (PPM), the TIC Sponsor, and in most the case the overgiding guidelines will be those of the lender and what they are willing to approve.  They TIC Sponsors and Lenders tend to be more flexible with estate settlement issues. 

I will also see if we can get a TIC Sponsor to comment as well. 
 

In resonponse to your third question, generally, TIC transactions are sold as “Reg D” Securities, and the resale of those positions must also be sold in this manner. The Sponsor’s Tenant in Common agreement allows for “early exits”, and generally, the terms of loan  agreements permit transfers, however, the legal documentation, PPMs, etc. cause these TIC postion sales to be cost prohibitive.

About 10% of the TIC industry, including my firm, SCI Real Estate Investments, offer TICs as non-securities. These non-securitized TIC interests are offered on  a real estate platform as strictly real estate interests. They generally have the same type of tenant-in-common agreements and lender requirements, however, the costs are not nearly as high, and  they can be sold readily to another TIC buyer. The process is that your interest would be first offered to the existing group of TIC investors in your particular property, they may be the logical buyers anyway because of their existing ownership in the property. If none of the other TIC owners have have an interest in purchasing additional ownership in  the property, it can then be offered to other potential TIC buyers either thru the Sponsor or  by the current owner of the TIC interest, We have done a few of these transaction and they have run quite smoothly. However, they are  actually quite rare. Potential TIC buyers of our interests are  however greatly comforted by the fact that there is an “early exit” plan in place in case they would  ever need to dispose of their interest early.