Updated on September 9, 2021
There are multiple ways owners of real property in California can hold title. Accordingly, anyone who owns, is purchasing, or is a prospective transferee of real property may want to familiarize themselves with the different ways in which title can be held. This blog post covers some basics on the different ways you can hold title to real property in California.
The decision of how to hold title often comes up during escrow when the escrow officer with ask the buyer for vesting instructions. In California, vesting instructions provide the escrow holder with instructions on how the new buyers are going to take title – how they are going to hold title in the county records.
The first consideration a property owner, buyer or prospective transferee may want to ask is whether he, she or it is going to be a sole owner or a co-owner. Sole ownership occurs when title is vested in a single person or single entity. The classic scenario is when a single person or entity purchases the property alone. However, a married person or domestic partner can also acquire and hold title as a sole owner. However, in these scenarios, the other spouse or domestic partner will likely need to relinquish their rights to the property.
On the other hand, when there are multiple owners of real property, the persons’ or entities’ interests will be those of co-owners. Pursuant to California Code section 682 et seq., California has adopted four primary methods of holding property as Co-Owners:
Tenancy in common is the default method of ownership amongst co-owners. Almost every interest held by co-owners is a tenancy in common unless it is acquired as part of a partnership, by a married couple or is created as a joint tenancy. Unlike some of the other manners of holding title, there is no prerequisite that co-owners hold equal interests.
For example, in a property with two tenants in common, Owner A could own a 75% interest and Owner B could own a 25% interest. Additionally, tenants in common do not have a right of survivorship. Using the same example, if Owner B died, his share in the property would not automatically transfer to Owner A. Instead, it would transfer pursuant the laws of testate or intestate succession.
If co-owners want to create a Joint Tenancy, they must expressly declare so in the deed. Additionally, joint tenants must have equal ownership interests in the property. Under common law, joint tenancy could only be created under a single will or transfer. However, in California, there is an exception to this rule. In California, a joint tenancy may also be created if the transfer involves one or more persons who already hold title to a property in a different form.
If the co-owners meet all the requirements of a Joint Tenancy, the joint tenants hold what is called the “right of survivorship”. Pursuant to the right of survivorship, when a joint tenant dies, his or her share automatically transfers to the surviving co-owner. Some people use joint tenancies as estate planning tools – if one person dies the other person inherits the deceased person’s interest after recording an affidavit of death of joint tenant.
Community Property is a manner in which real property can be held by married persons. However, simply because two people are married does not necessarily mean that they own property as Community Property. Generally speaking, if property is acquired during the marriage, it is presumed to be Community Property.
However, there are exceptions. For example, if the deed or another agreement specifies otherwise. To the extent real property is held as basic Community Property, there is no automatic right of survivorship. If spouses want to establish a right of survivorship, the deed should expressly declare that the property is held as “community property with a right of survivorship”.
Tenancies in Partnership
A partnership is an association of two or more persons to conduct business together for profit. (Corp. Code section 16202.) A partnership interest in real property is one owned by co-owners who are in a business partnership together for a partnership purpose. Partnership property can be held in the name of the partnership itself, or an individual.
Regardless of how the property is held, property acquired by a partnership for a partnership purpose is the property of the partnership and not the individual partners. (Corp. Code section 16203.) Accordingly, a partner’s interest in the partnership real property is directly tied to the partner’s interest in the partnership.
Of course, there are many nuances within the law. This is just a primer to help real property owners, purchasers, or prospective transferees grasp the basic forms of title in California. If you have questions about the manner in which you hold or plan to hold title, you may want consult with a real estate attorney. The top real estate attorneys at Schorr Law have years of experience working on real estate issues, including those involving forms of title. Contact Schorr Law today to schedule a consultation.