OWNERSHIP OF TITLE
1. To analyze the various forms of co-ownership of real property.
2. To discuss the advantages and disadvantages of joint tenancy,
tenancy in common and community property and group investments.
3. To explain the title problems arising from ownership by
corporations, associations, partnerships and joint ventures.
4. To consider some practical and legal aspects of ownership by group
5. To understand the various methods of co-ownership and multi-
Advantages of Joint Tenancy
1. Probate proceedings are not necessary.
2. Surving joint tenant takes title free from debts and claims
against deceased joint tenant.
1. May be severed by voluntary transfer or operation of law.
2. The first joint tenant to pass away has no power to dispose of his
interest by will.
3. Tax disadvantages, capital gains and possible gift tax.
1. Unity of interest requires that a married man who acquires
property during marriage presumptively acquires it as community
property. Hence, if a married man were to acquire real property
title as joint tenant with a single man, the deed might include
"Mary Brown, wife of John Brown, one of the grantees herein, joins
as grantor in this deed for the sole purpose - of evidencing her
consent to the creation and establishment of a valid joint tenancy
in the grantees named above."
2. Where a husband and wife wish their interest not to be held as
community property but as joint tenants with a third party, the
recital might be:
"John Brown and Mary Brown herein accept the interest conveyed to
them as joint tenants as their sole and separate property with
William Smith by the foregoing deed."
The consequences of these conveyances have great ramifications and
spouses should be advised by adequate legal representation before they
enter into these relationships.
CASES FOR DISCUSSION
Hamel v. Gotkin, 202 CA 2d 27: A trust deed by one joint tenant does
not destroy the joint tenancy. Consider that most lenders would
require that in addition to a trust deed on the joint tenants interest
in the property, you would also provide a fully paid up life insurance
policy equal to the amount of the outstanding debt.
Abbey v. Lord, 168 CA 2d 499: A joint tenant who has murdered the
other joint tenant cannot succeed to the entire property by his
wrongful act. Murder terminated the joint tenancy - tenancy in
Burke v. Stevens, 264 CA 2d 30: Joint tenant executes a power of
attorney, attorney in fact executes a deed back to X, a strawman who
conveyed the wife's interest back to wife. After his wife's death,
husband claims the right of survivorship. The court held in favor of
the wife's heirs, stating that it is not necessary to have consent to
terminate a joint tenancy. Also, the fact that the deed was
unacknowledged and unrecorded is not controlling since neither act was
necessary to accomplish the termination.
Southern Adjustment Bureau v. Nelson, 230 CA 2d 539: In a partition
action the court awarded a tenant in commmon who had made advances
from his own pocket to paxes, insurance and trust deed payments, to
preserve the common estate was entitled to reimbursement of his entire
advancement before the balance of the sale proceeds was equally
ANTINUPTUAL AGREEMENT: A contract made by a man and a woman
in contemplation of the marriage.
COMMUNITY PROPERTY: Property acquired by husband and wife during the
marriage, when not acquired as separate property.
CONDOMINIUM: Ownership of a divided interest in an individual unit
and ownership in common with others in a structure and land.
CORPORATION: An artificial person created by law and possessing
certain rights privileges and duties of a natural person.
JOINT TENANCY: Title held by two or more natural persons in equal
shares with a right of survivorship.
LIMITED PARTNERSHIP: A partnership composed of some partners whose
contribution and liability are limited and whose rights to exercise
control and management is restricted.
PARTNERSHIP: A voluntary association of two or more persons for the
purpose of business for their mutual benefit.
SEPARATE PROPERTY: Property acquired before marriage and property
acquired after a marriage by gift, devise, decent or bequest.
TENANCY IN COMMON: Ownership of property by two or more persons in
undivided interest without right of survivorship.
WASTE: The destruction of material, alteration of or injury to the
premises by a tenant for life or years.
I CHAPTER 3
A. Severalty is ownership of real property by
one individual as the sole owner.
II CO-OWNERSHIP OF REAL ESTATE: FORMS AND
A. Nature of Co-ownership
1. Ownership by several persons each with
an individual interest in the real
2. Concurrent ownership: mutual rights
3. Shared rights, responsibilities and
privileges regarding the real property
B. Forms / Types:
1. Joint tenancy "with right of survivor-
2. Tenants in common
3. Community property
5. Joint venture
7. Condominiums/planned unit developments
8. Cooperative apartments
9. Time share ownership
C. Joint Tenancy: a single estate held by
two or more natural persons (not corporations).
1. Nature: upon the death of one joint
tenant, his individual right to share
in the estate of the land ceases and
passes automatically to the other
a. Civil Code Sec. 683
b. "Joint tenancy" must be expressed
in the deed.
1) "A and B, as joint tenants"
2) No need for "right of surviv-
3) "Joint tenancy" is not conclus-
ive as to the character but
creates a rebuttable presumption.
2. Characteristics of survivorship
a. No debts: surviving joint tenant
takes the property of the deceased
joint tenant free and clear of any
judgment liens or deeds of trust
(made after the joint tenancy), or
other liens or debts of the deceased.
b. No Probate: the deceased interest
in the real property passes free
of any probate.
c. Automatic transfer
1) Action required to recognize
the surviving joint tenant's
interest in the public record.
a) Certified death certificate
b) Affidavit of death of
joint tenant recorded.
d. Simultaneous death: Probate Code
Sec. 296 "separate probate of each
e. Does a joint tenancy take the place
of a will?
1) A joint tenant may not will his
interest in joint tenancy
2) Joint tenant property is a poor
estate plan because the other
joint tenant may convey his
interest by a severance of the
3) Joint tenancy does not avoid
Federal estate taxes.
4) Problem with gift taxes
5) Problem of possible loss of
step up in basis for tax
purposes when a husband and wife
choose joint tenancy as opposed
to community property. Husband
and wife acquire property for
$ 100,000. Husband dies,
property is now valued at
$ 160,000. New tax basis of Wife
50,000 plus Husband 50,000 +
30,000 (1/2 of appreciation). If
community property basis to Wife
would step up to full fair market
value at death, $ 160,000.
6) Murder of a joint tenant by a
survivor prevents a survivor
from "getting" the estate of
deceased joint tenant.
a) includes voluntary
3. Essential Elements of a Joint Tenancy
a. Four unities of title required
by common law
1) Unity of interest - equal share
2) Unity of title - same deed, will
or transfer instrument.
3) Unity of time - title vests at
the same moment.
4) Unity of possession - undivided
interest in equal right of
possession, i.e. all not part.
Toth v. Crawford (1963) 212 CA 2
827. Where upon creation of a
joint tenancy "A" grantor, is
orally promised by the "B",
the grantee joint tenant, that
"A" will have exclusive use and
enjoyment and possession. Does
the agreement defeat the joint
No. "Joint tenants may contract
as between themselves, that one
shall have exclusive possession
and such a contract does not des-
troy the other consequences of the
joint tenancy form of ownership.
This is true even though the con-
tract for possession is contemp-
oranious with the creation of the
joint tenancy. . . "
5) At common law, if any of the
above were missing the result
would be no joint tenancy and
the resulting residual estate
would convert the deed to a
tenancy in common.
b. California has statutorily modified
the common law.
1) The sole owner may deed to
himself or herself and another
and create a joint tenancy.
a) A to A+B+C as joint tenants
4. Rights/Duties and privileges of joint
a. Severance: Power of a joint tenant
to destroy the right of survivor-
ship and create a tenancy in common
as to his interest.
1) A joint tenant may transfer
his interest during his lifetime.
a) A,B,&C as joint tenants
C conveys to D. Result,
D's interest is a tenant
in common as to one-third
however, A & B are still
2) Consent of other joint tenant
is not required.
3) A joint tenant may deed to
himself to defeat the joint
a) A & B as joint tenants.
B deeds to B, himself, his
half interest as tenant in
common. Right of surviv-
orship is lost.
b) Usually in a husband and
c) Used to allow a joint
tenant to will his interest
d) Civil Code Section 683
Riddle v. Harmon
(1980) 102 CA 3d 524, where
joint tenant wife deeds
to herself to terminate
the right of survivorship,
who will take her interest:
her husband, who claims
rights as a survivor under
the joint tenancy, or her
estate by her will?
The wife's estate. "One
joint tenant may unilateraly
sever the joint tenancy with-
out the use of an intermediary
b. Right of possession: a joint
tenant has an equal right to possess
all of the premises.
1) Consider: investment property
with one joint tenant taking
posession, is he obligated to
2) Hammond v. McArthur 30 CA 2d 512
If one of two joint tenants
makes a conveyance of his
interest for "life", upon
termination of the life estate,
will the joint tenancy revive?
Yes. ". . . when one of two joint
tenants in fee simple makes a
conveyance of his interest for
life, upon the termination of a
life estate, the joint tenancy, as
originally existed, revives."
c. Right to contribution: pro rata
share for the ordinary repairs,
cost of maintenance and expenses.
1) Failure results in an equit-
a) Expensive and difficult
2) No right as to improvements
unless agreed to.
a) Question of what is an
d. Husband and Wife may hold property
as joint tenants as opposed to
1) However, cannot hold the
property as community property
and joint tenant property at
the same propery. Tomaier v.
Tomaier 23 Cal 2d 754.
2) H and W may have an agreement
that although held as joint
tenancy it is in fact community
a) In a dissolution of the
marriage: the single
family residence, acquired
during the marriage is
presumed to be community
property, even though
held as joint tenants.
CC Sec. 5110
b) Civil Code Sec. 5116:
creditors may claim a
joint tenancy is in fact
3) Devisees under a will may seek
to establish that the real
property is in fact subject
to testamentary disposition.
4) A joint tenant is under legal
obligation not to commit waste
on the property.
5) Summary: in small estates,
joint tenancies sometimes
offer advantages particularly
where the family residence
is the most important item and
husband and wife intend the
surviving joint tenants to
take everything regardless of
a) Consider: Supra C 2 e 5)
6) Pointer: a joint tenancy deed
however, may inadvertently
disinherit the children from a
a) consider: husband and wife
have children, first husband
dies, wife remarries husband
two. She acquires property
with husband two as joint
tenants. If wife were to die
husband two would inherit all
the property free and clear of
the claims of the children.
b) consider: joint tenancy
property is not affected by a
c) consider: joint tenancy may
avoid probate costs, delays and
expenses. However, seldom
saves estate taxes.
d) consider: a joint tenacy may
be severed thereby destroying
the right of survivorship and
the reasonable expectation of
e) consider: one joint tenant
cannot sell, lease or mortgage
the entire property without
the consent of the other joint
tenant. Hence problems:
(1) What if one joint tenant
is ill and incompetent?
(2) If one joint tenant is
(3) What if he is not
(4) What if he has difficulty
in managing the property?
D. Tenancy in Common: sole unity is out of
1. General Character: Possession
a. Civil Code provides that every
interest in property created in
favor of two or more persons is a
tenancy in common unless otherwise
stated. e.g. Husband and Wife as
b. A residual form of ownership for
multiple interests in real property.
c. Civil Code Sec. 686
2. Rights and Duties
a. Each interest is freely transfer-
able and subject to liens and
encumbrances of the other tenants
b. Ownership is undivided.
1) Each tenant in common may not
transfer a specific part of
the common parcel.
c. The right of contribution
1) If a co-tenant pays more than
his share of taxes or liens
on the common property then
he is entitled to an equitable
lien for reimbursement.
d. Right to partition.
1) Co-tenants, whether joint
tenants or tenants in common
may exchange deeds to the
property or by agreement vol-
untarily partition the land.
e. Judicial partition
1) In an unwanted co-ownership
situation co-tenants (joint
tenants included) can terminate
the relationship. The courts
prefer to divide physically
however, usually it results
in a judicially ordered sale
of the property.
f. Right of the co-owners to share
in the products of the land and
rent from the land.
3. Fractional Interest
a. A tenant in common may own an
undivided interest which is not
equal in duration or quantity and
may arise from different convey-
ances or instruments at different
4. Creation: title on the deed
a. Title should recite the fractional
interest that each grantee acquires
1) " A, a single man, an undivided
1/4 interest, and B, a married
man, an undivided half interest
and C, a married woman, an
undivided 1/4 interest in the
2) Without the above recital, it
is presumed to be equal co-
E. Termination of Joint Tenancy - Tenancy in Common
3. Transfer Between Co-Tenants
III CONCERNS / IMPLICATIONS FOR GROUP INVESTMENTS
A. Co-Tenancy is many times the choice for
co-owners of investment property. However,
a number of problems may arise if the
co-investers have different goals. Consider:
1. Problems of Unanimous Consent
a. Suppose the investing parties
decide to sell the property. All
parties must sign as grantors on
the deed and all parties must sign
any agreement of sale.
1) What if one party refuses to
sign, what remedy or recourse?
What if one party wishes more
money, or a higher price?
b. Mortgage: suppose the parties
decide to refinance the property,
how will the loan proceeds be
1) What if one party feels he
should have a higher return on
his investment and wants more
2) What if one party refuses to
sign the loan papers unless he
is given more of the cash in
exchange for a reduction of his
c. Rent and possession.
1) What if one of the parties moves
in and refuses to pay rent?
2) Who will pay the mortgage during
the period of possession?
3) Who will pay the taxes?
4) Who will pay the loan interest?
5) Who will pay for maintenance of
2. Problems among Tenants in Common
a. How are contributions for taxes,
loan payments and maintenance
1) What if one party refuses to
2) What if another party advances
money to cover the refusal of
another co-tenant. Is he en-
titled to interest? At what
b. Choice of improvement if any.
1) What if one party refuses to
go along with the improvement
plan, is he obligated to pay
for the improvement?
c. Maintenance problems: consider,
1) A party who refuses to pay his
share of maintenance.
3. The problem of one tenant in common is
the problem of all the tenants.
a. What if one tenant in common goes
bankrupt? Has there been a transfer
of title to the trustee in bankruptcy?
1) Can the property be sold
without permission of the
2) Can the property be refinanced
without permission of the bankruptcy
b. What if one co-tenant dies? What
effect will the probate proceeding
have on the ability of the other
co-tenants to refinance, to mort-
gage the property, to sell the
property, or to rent the property?
c. What if one co-tenant ends up in
a divorce proceeding? How will
his or her share of taxes and
insurance be provided for if the
spouses refuse to pay?
d. What if one co-tenant fails to
pay his state taxes, or federal
taxes and a lien is recorded in
the county recorder's office? Can
the property be refinanced or sold
without payment of the full amount?
e. What if one co-tenant's interest
is encumbered by a judgment lien?
Who is obligated to pay the lien
to clear title for a sale or
refinance? What remedies are
4. The common law and statutory rights of
one co-tenant against another and the
duties and obligations of one co-tenant
to the others are not self enforcing,
many of the problems discussed above
must be provided for in either a
co-tenancy agreement or consideration
of another investment entity.
IV ENTITIES FOR GROUP INVESTMENT
A real estate entity or a holding vehicle or
investment vehicle is where title to the land
is placed in a separate entity from the
individual investors names.
A. General Partnership: A general partnership
is an ownership by several persons. A
partnership is an entity capable of holding title.
a. By agreement, either oral or written,
or implied by the actions of the parties.
2. Statement: Title Holding Entity
a. Corporations Code Sec. 15010.5
b. Recorded in the county recorder's
c. Not to be confused with a Fictitious
Business Name statement.
d. Title held in the name of the
a) General partners all have
equal management and control.
3. Oral / Written
4. Unlimited Liability
5. Equal Vote unless Otherwise Stated
B. Limited Partnership is composed of one or
more general partners and one or more
1. Creation: California Revised Limited
Partnership Act and Corporations Code
Sec. 15611- Sec. 16723 modernize
2. C R L P A
a. Provides operational and procedural
advantages of a corporation.
b. Preserving the special character of
the limited partnership entity.
c. Provides for centralized filing,
execution of a short form certif-
d. Provides for reservation of the
partnership name with the Secretary
e. Requires a written partnership
agreement entered into by all
f. Provides limited partners with
1) Provides for financial report-
ing and record keeping by the
2) Provides for expanded protect-
ion from creditors, that is,
it provides a vestor with the
ability for his involvement
in participation and control
of the partnership business.
3) Provides for safe harbor
3. Limited Liability: a Ltd Partnership
is limited to the amount of money they
have invested, they are not liable
for the total damages.
4. Tax Benefits: One of the main reasons
for the choice of the entity.
a. Compare: a corporation which is
a tax paying entity.
b. Flow through benefits of book write
off, that is depreciation.
a) limited passive write off
against income. TRA 86
c. I.R.S. seeks to challenge Ltd's as
more like corporations and there-
fore tax paying.
d. The characteristics that the I.R.S.
looks to are:
1) Limited liability.
2) Centralized management.
3) Continuity of life
4) Free transferability of
5) TRA 1986 adverse effect: limit
on passive income loss that is
deductible against other income.
C. Corporation: Artificial person protected
a. Creation, a corporation is
created by the state upon filing
of articles of incorporation.
b. A corporation has very broad powers.
c. A board of directors provides for
the exercise of the power.
d. Shareholders of a corporation have
limited involvement in authority
to manage and control the corpor-
2. Tax Paying Entity: In both state and
federal law the corporation is a dis-
tinct entity apart from its shareholders.
a. Must file and pay separate corporate
b. Subchapter S, an election to be
taxed as a partnership, thus elim-
inating the separate corporate tax
to provide for a pro rata income
allocable to each shareholder.
Internal Revenue Code Sec. 1371 & 1379
c. Limited liability.
3. Types of Corporations
a. Business Corporations.
b. Non Profit Corporations.
c. Public Utility Corporations.
d. Municipal Corporations.
e. Corporations Sole
f. Professional Corporations.
4. Foreign Corporation
a. A corporation organized in compl-
iance with laws of another state
or another country.
5. Domestic Corporation: artificial
person created by CA state law existence
dependent upon state law.
D. Joint Venture
1. Single Purpose - General Partnership
a. Business venture rather than a
partnership that encompasses all
or most of the business ventures
of the partners.
b. Agreement for sharing a profit and
c. Attempt to insulate members from
open ended liability of a general
2. S & L / Buildings Corporation
1. Tax Laws favor (discussed infra.)
V MULTIPLE RESIDENTIAL / COMMERCIAL DEVELOPMENT
A. Condominiums - Land in Common
1. Statutorily a condominium is an estate
in real property consisting of an un-
divided interest in common, in a portion
of a parcel of real property together
with a separate interest in space in
a residential, industrial or commercial
building on the real property such as an
apartment, office or store.
C.C. Sec. 783
2. Condominium is derived from Latin,
meaning owning together.
3. The C.C.&R's set out the basic rights
and obligations of each of the owners.
a. Provides for a managing board.
b. Provides for common expenses to be
shared pro rata.
c. Describes the unity of the building
and the use it can be made with
restrictions on modifications of
4. Air Space
a. The unit is that portion of the
building which is owned in fee simple
by the owner.
b. Other items, parking, exclusive
easements and use of common facil-
ities are owned in common with
other members of the condominium
on a percentage basis.
5. Board of Directors: Management body,
created by the C.C.&R's subject to
regulation of by laws.
a. Decisions on maintenance and
6. Budget: enforcement and collection of
assesments review the budget. The
budget should be adequate to provide
not only for current expenses but
future expenses, repairs, maintenance
a. Adequate reserves for roof main-
tenance and repair, painting,
1) Private foreclosure sale
2) Collection by lawsuit in
recording of lien
b. Enforcement of C.C.&R's and by laws
1) By fine
2) By injunction
3) Exclusion of use
a) use of facilities, garages
recreation room, or pool.
B. Planned unit developments/Townhouse developments
1. Owner owns the land underneath his
2. Special zoning ordinances and variances
3. Provides for larger open space or
green belt, which is owned in common
C. Office Condominium
1. Legal Description
a. Provides flexibility in the add-
ition of space
b. Provides for outright ownership.
2. Problems with the budget and assessments.
a. Exterior lighting, air conditioning,
paving and insurance. Are
expenses going to be divided pro
rata by space or pro rata by hours
of operation during the week?
b. Utility services required for all
tenants all days of the week.
1) Enforcement collection?
2) Control in voting?
D. Co - op
1. Share in Building Owner - Usually Corp.
2. Exchange lease to unit