TITLE PROBLEMS CONFRONTING JOINT OWNERS OF REAL ESTATE IN CALIFORNIA
This article does NOT apply to married couples or registered domestic partners. In such cases, you should consult a family law attorney about your property rights.

Do you own your home or other real estate in California with someone who is not your spouse? What are your rights when the legal title to your property is held jointly?

Example: Cohabiting Boyfriend and Girlfriend decide to buy a home. Boyfriend contributes $20,000 to the down payment. Girlfriend contributes $0 to the down payment. Boyfriend and Girlfriend apply together and jointly qualify for the mortgage loan. Boyfriend and Girlfriend occupy the house and each pays approximately half of the house related expenses. Years later Boyfriend and Girlfriend break up but they cannot agree on how to divide their interests in the house.

You may assume that when Boyfriend and Girlfriend divide proceeds from the sale of the house, Boyfriend is entitled to a larger share because he invested more money in the purchase. But that is not necessarily true. If a court had to decide how to divide the house between these co-owners, the result would depend on how title to the property was held, and whether at the time that they purchased the property, there was an agreement between them about their interests.

California law requires that agreements or contracts for the purchase, sale or transfer of real property be in writing. If there is no agreement between co-owners, it is presumed that the deed accurately reflects the true ownership of the property. There are many exceptions to these rules. But there is no better way to protect your investment than to have a written contract specifying the material terms of your agreement with your co-owners.

Agreements between Owners: Your agreement should include all terms that are important to you but at minimum you should address the following issues:

1.  How will title be held? Under California law, a recorded grant deed or quitclaim deed is presumed to correctly describe the legal title and the ownership interests of the named owners of real property. The presumption can be overcome by “clear and convincing evidence”, but absent a written agreement, the burden of proof is very high for the person challenging the record title.
   
   There are several ways that unmarried people can jointly hold title to real estate. The most common forms of joint ownership are “Joint Tenancy” and “Tenancy in Common.” The manner in which joint owners hold title will determine who owns the property after one of the co-owners dies. The form of in which title is held can also determine the percentage of interest of each co-owner.
   
   Tenancy in Common: Unmarried people may hold title is as “Tenancy in Common.” Each tenant in common holds title to an undivided interest in the property. A deed providing for tenancy in common should specify the percentage of each common tenant’s respective ownership interest. The ownership interests do not have to be equal if title is held as tenants in common.
   
   A tenant in common can sell or transfer his/her interest in the property to another person or entity without “Partition” (discussed below) without the consent of the other common tenants, unless there is an agreement signed by the owners that restricts transfers. The transferee will receive the transferring tenant’s interest and become a tenant in common with the co-owner who has not transferred an interest. If one of the tenants in common dies, the heirs of the deceased co-owner will inherit the interest of the deceased.
   
   Joint Tenancy differs from Tenancy in Common in two important ways:
   Joint tenants are said to have a “unity of interest,” meaning that their interests in the real property are equal. If two joint tenants are named on the deed, each owns a 50% interest in the property. Joint tenants also must acquire their interests at the same time by the same deed.
   
   The second important feature of joint tenancy is the “right of survivorship.” If two people own property as joint tenants, and one dies, the surviving joint tenant will become the owner of the whole property in most cases. The deceased’s heirs will not inherit the property interest of the deceased joint tenant.
   
   Many lenders, escrows, title companies and real estate professionals assume that co-owners intend to hold title in joint tenancy. But in many cases, the co-owners do not intent to grant each other “rights of survivorship.” If for example you have a child from a different relationship that your relationship with your co-owner, you probably want your child to inherit your property. If that is the case you should make sure that title to jointly owned real estate is held as tenants in common.
   
   A sale or transfer of a property interest by a joint tenant of his or her interest changes the co-ownership from joint tenancy to a tenancy in common. If any joint tenant wishes to terminate the right of survivorship, he or she can do so without the consent of the other owner(s) by signing simply recording an appropriate document with the County Recorder’s office. After the joint tenancy is severed, the owners become “Tenants in Common”. Consult your attorney for advice on how to hold title and details on the procedure for severing a joint tenancy.
   
   1. How will your interests in the property be apportioned and how will expenses be divided? – If on co-owner contributes more money for the purchase and/or pays more of the property expenses such as mortgage, insurance, taxes, maintenance, repairs, improvements, homeowners’ assessments, etc. will the ownership interests be divided according to the percentage each contributes or will there be some other formula or method to provide for reimbursement? Will the difference be treated as a gift or a loan? In many cases, absent an agreement between the owners, payment of a larger share of the down payment is treated as a gift. On the other hand, if one co-owner pays more of the property expenses after purchase, he or she is often entitled to credit or reimbursement at the time that the property is divided. The decision about how to apportion and credit the down payment and the expenses of ownership should be made by the co-owners in writing before the purchase takes place to avoid any misunderstanding or expensive legal battles later.
   
   2. Occupancy Issues: The law presumes that all owners on title have a right to possession. Co-owners should discuss the financial obligations between a co-owner in possession and a co-owner who does not occupy the property. Unless the owners have made a different agreement, do not assume that the occupant has any greater financial obligation that a co-owner who does not live at the property.
   
   3. Partition/Right to Sell: Absent a contract between the owners stating otherwise, any co-owner is entitled to liquidate his/her interest ant any time through a “partition” lawsuit. The purpose of a partition is to divide the property between co-owners. Since most developed real estate cannot be physically divided, in the modern age, partition is accomplished by a sale of the property and a division of the proceeds.
   
   In most partition lawsuits, the co-owners also seek an “accounting” of the expenditures of each co-owner for property related expenses such as mortgage principal payments, property taxes and improvements.
   
   Consult an attorney to prepare a joint ownership agreement. In the long run, a contract will save you money in legal fees should the relationship break down, should a co-owner’s financial situation change or should a co-owner die or become incapacitated.