How to Take Title to a New Property in California

Congratulations! You’ve just purchased a new home or investment property in California, and you’re wondering how you should take title to that new property.

Unmarried New Owner

If the property is being transferred to one person who is not married or in a registered domestic partnership, then the answer to the question of how to take title is easy.  You simply put down the recipient’s name on the grant deed. You may also want to point out on the deed itself that the new owner/recipient of the property is unmarried so no one later has to wonder if there was a spouse who had a community property interest in the transferred property at the time it was transferred.

More Than One Unmarried Recipient

When there is more than one unmarried individuals who want to take title jointly, then there are three basic ways: tenancy in common, joint tenancy, or partnership (in the name of the partnership). The main two forms are tenancy in common and joint tenancy, as you must be in business together to take title as a partnership.

Tenancy in Common vs. Joint Tenancy

Tenancy in Common (aka a “TIC”) is similar to taking title by Joint Tenancy. Each co-owner has an “undivided interest” in the whole property.  In other words, each co-owner may use the whole property and each is entitled to income from the whole property in proportion to his or her ownership share.  Neither co-owner has the exclusive right to use or transfer a specific physical part of the property.

Tenancy in Common is best when the new co-owners want to leave their interests in the property to someone other than the other co-owner(s), or the new owners want to own the property in unequal shares.

For example, Jim and Adam are good friends in their late 20s and want to buy a duplex together. One side of the duplex is slightly larger than the other, and Jim is willing to pay more for a larger share.  They could take the property by Tenancy in Common, with Jim taking 60 percent and Adam taking 40 percent, and Jim could live in the larger unit. Both Jim and Adam can leave their interest in the property to different beneficiaries in their will.

If two owners have a falling out and one co-owner can’t sell their separate share and they want to sell the entire property so they can both go their separate way, that co-owner cannot force the other co-owner to sell their interest.  The co-owner who wants to leave must bring what’s called a “partition action” from the local county Superior Court for the right to sell or divide the property.

TIC is the right form of ownership for most co-owners unless they are in a close family relationship, in which case joint tenancy is probably preferable.

One drawback of the TIC form of taking title is one co-owner could find him- or herself co-owning a piece of property with the children of their original co-owner after the original co-owner passes away. Also, when one co-owner dies, unlike joint tenancy, probate is necessary. However, probate can be avoided by holding property in a living trust or in joint tenancy.

In California, Tenancy is Common is the presumed form of holding title when two or more people automatically take title unless the deed specifies another form of holding title.

Joint Tenancy

The most significant feature of Joint Tenancy is when one joint tenant dies, then his or her interest in the property goes to the surviving joint tenant or tenants. Probate is not necessary, and if the deceased co-owner’s will provided otherwise (say the will gave their portion of the property to another relative), the joint tenancy trumps the will. Joint tenants also must own equal shares.

Joint Tenancy is useful for unmarried co-owners where the co-owners want the property to go automatically to the surviving co-owners, without the time and expense of probate.

To transfer a property by joint tenancy, the deed must specify that the co-tenants hold title as joint tenants “with right of survivorship.”

Married Co-Owners

If a married couple is going to be taking title to new property, they can take title as joint tenants or as tenants in common. However, there is also a better option.

Community Property With Right of Survivorship

Married couples will most likely want to take title to the property as “community property with right of survivorship.” Property held in this form goes directly to a surviving spouse or domestic partner, and need not go through probate. The survivor only records a basic document with the county recorder where the property is located.  The other advantage over Joint Tenancy is unlike Joint Tenancy, both partners must agree to any termination or transfer of the property. One co-owner cannot transfer their interest to someone else, and one owner cannot get a partition order from Superior court.

There are also special tax benefits. I am not a tax attorney, so a discussion of the special tax benefits of Community Property with right of survivorship is beyond the scope of this article.

In order to transfer property into community property with right of survivorship, you write into the deed, for example,  “to Carol Smith and George Smith, husband and wife (or domestic partners), as community property with right of survivorship.”

Married couples can also hold title to property separately, as their own separate property. If you are planning to do so in California which is a community property state, I encourage you to consult a real estate attorney.

No matter what form you choose, be careful with real estate transfers. The process of choosing a form, drafting deeds, and recording deeds is fraught with peril and the consequences of mistakes can be severe. Take your time to consider your options before choosing the correct form to take title.  Then work closely with your title company or attorney to make sure the correct deeds are recorded properly.

John Corcoran is an attorney with Plastiras & Terrizzi in San Rafael, California (Marin County).  He advises clients about various real estate and land use matters.  He can be reached at (415) 250-8131 or [email protected]

Photo credit: Flickr/Brian Teutsch