Does your user account have SQL Server System Administrator privileges in SQL Server?

If you’re upgrading TFS 2010 to 2012, it’s highly recommended that you assign sysadmin privileges to the user account that’s doing the upgrade.

Some database upgrade steps involve ALTER DATABASE statements and other commands that can’t be done by a normal user. If a step fails, you are likely to end up with a corrupted Configuration database (so you have to restore from backup).