Real Estate

An affidavit is a written declaration under oath.  Real property affidavits are used to update public title records upon the death of a joint property owner or to activate a TOD deed on the owner's death.  Affidavits are also used to document a change of trustee of a trust that owns real property,  and to collect real property in a small estate, among other things.  When a person dies owning real property, the county assessor must be notified using form BOE-502-D.

A joint tenant jointly owns 100% of a property. Once a joint tenancy is created, neither owner can sell the property without the other owner's permission.  Nor can a joint tenant take out a loan on the property without permission.  On the other hand, a joint tenancy can be "severed" and turned into a tenancy-in-common without the other owner's consent.

In 1978, California taxpayers passed Proposition 13 to deal with rapidly increasing property values and therefore property taxes.  Prop 13 locked in a property tax rate of 1% of property value.  It also capped annual increases at 2% of the previous year's assessed value. When property is sold, however, the new owner's property taxes are based on 1% market value.

Property inherited by a surviving spouse is exempt from probate administration, regardless of whether the property was community or separate property at the deceased spouse's death.  When one spouse dies with significant "probate assets," the surviving spouse can petition the probate court to make orders that confirm the surviving spouse's joint or inherited interest.  A spousal property order can be recorded as a public record to prove that title is held by the surviving spouse.

A Deed of Trust (or Trust Deed) is California's functional equivalent of a mortgage.  It is used by a lender to claim a secured interest in property until a loan is paid off.  Trust Deeds sometimes include an "Assignment of Rents," which makes the property's rental income additional security for the loan.  A Deed of Trust doesn't transfer ownership of property, but it gives the lender a right to foreclose on the property if the debt is not repaid or the terms of the loan are not honored.

A lien on real property secures payment of a debt that is owed by the property owner.  A deed of trust creates one type of lien on property.  Mechanic's liens are created by law when property workers don't get paid after improving or repairing the property.  Tax liens are imposed by a government to secure payment of tax debts.  Unpaid child support obligations can also result in liens.  A homeowners association can acquire a lien on property for unpaid assessments.  Judgment debts can be recorded and lien property to secure payment of the debt.  A creditor with a lien on your property can seize and sell your property when certain conditions are met.

Proposition 19 protects certain family property transfers from being reassessed at market value for tax purposes.  It applies to a purchase or transfer of a family home between parents and their children (and in some cases, from grandparents to their grandchildren) if the property continues as the family home of the new owner.  The new owner must live in the home as their primary residence within one year of the transfer and file for the homeowners’ or disabled veterans’ exemption within one year to qualify for the exclusion.  Prop 19 also limits property taxes for residents over 55 when they dispose of a property and transfer the taxable value to a replacement property.

A tenant-in-common of real property is like a shareholder in a corporation.  A shareholder owns a % of shares but doesn't own any specific property of the corporation.  A tenant-in-common's owns a % of the property and has the right to occupy the entire property.  The tenant-in-common can legally sell and even mortgage his or her % of ownership.  When a tenant-in-common dies, his or her % ownership doesn't pass to the remaining owners.  Instead, it belongs to the deceased owner's heirs or beneficiaries as specified in his or her estate plan.  For property tax purposes, the transfer of a tenant-in-common interest is considered a change in ownership of a partial share of the property and can trigger a proportional increase in property taxes.

A Grant Deed is a legal instrument that conveys real property.  It can also be called a Special or Limited Warranty Deed.  A Grant Deed states that the owner "grants" the property to another owner, which means that the owner is transferring full ownership of the property and there are no unpaid taxes or other debts that will pass from the grantor to the new owner.  The property rights transferred by grant deed include rights of way and access through an adjacent property that benefit the owner of the property.  A Grant Deed, like any other deed, transfers ownership when it is signed by the owner and delivered to the new owner.  A Grant Deed also transfers to the grantee any interest acquired by the grantor after the Grant Deed is signed and delivered.  Recording the Grant Deed makes it a public title record that must be honored by the public.

A life estate is a joint ownership interest in property that is divided between the owner for life and a future owner.  The owner of a life estate cannot sell or mortgage the property without the consent of the future owner and has a responsibility to keep up the property until death or transfer of the property to the future owner.  For property tax purposes, a change of ownership occurs when the future owner becomes the present owner of the property.  The tax basis of the property still gets stepped-up to market value on the death of the life tenant.  Because a life estate passes automatically to the future owner initially named, it avoids probate but prevents the life estate owner from changing who inherits the property.

The 'Revocable TOD Deed' concept was adopted in California in 2016.  TOD stands for "transfer-on-death."  TOD deeds are used to avoid probate and are less expensive to create than a living trust.  However, if several very specific legal requirements aren't followed, then the TOD deed will not be effective.  Over time, additional requirements have been added to the law.  A process to challenge TOD deeds at the owner's death has even been adopted.  For property tax purposes, a TOD deed isn't treated as a change in ownership until the owner's death.  A TOD deed doesn't limit the owner's ability to sell or mortgage the property.  A TOD deed can be revoked at any time.  Unlike a living trust, a TOD deed cannot provide for alternate beneficiaries if a named beneficiary dies before the property owner.  Although the beneficiary may face a challenge in selling the property for the first three years due to limited title insurance coverage, a TOD deed gives the owner more control than the owner would have by adding a joint tenant to the title.

A Quitclaim Deed transfers real property by "quitclaim, release, and remise" instead of by "grant," which means there are no implied warranties of title.  In other words, a person can quitclaim property to another person even if the first person doesn't fully own the property.  Quitclaim Deeds are used to release a person's claims to a particular property, such as in a divorce or property dispute.