The vast majority of joint tenancies in California are used as a will substitute among family members, according to the California Legislature. In a joint tenancy, the surviving member among the title holders will inherit the property. An alternative method is to hold the property as tenants in common, in which case each party owns a percentage interest in the property. In this case if one of the tenants passes, their percentage then goes to the deceased person’s heirs.
Real estate attorneys usually do not recommend joint tenancy because of the risks involved. Escrow officers, alternatively, often suggest it as an easy option. The reason there is a lot of potential risk is that a joint tenancy requires a great amount of trust in the co-parties. Any joint tenant may sever the joint tenancy at any time by recording a deed. For example, if Tom, Dick, and Harry are in a joint tenancy together, Harry could deed the property to himself without the other joint tenants knowing. In this case, they would all become tenants in common, changing their interests to a percentage base. While this may be preferred by all parties in some cases, if this is not the agreement they wished to enter into they would have no control of the change. They would simply be relying on the trust they had in each other to maintain the joint tenancy. A huge problem this can trigger if not done properly is reassessment of the property, meaning the newly formed tenants in common may be hit with a heavy tax bill.
Severing a Joint Tenancy
There are cases where a joint tenant may wish to sever a joint tenancy either with or against the wishes of the other joint tenants. In many cases, the joint tenants simply do not have the same interests in the property. One joint tenant may wish to live in the home while the other wishes to sell it. In other cases, all joint tenants may wish to share the property without selling it, but may not be putting in equal efforts to maintain the property. This may include, but is not limited to, paying for or resolving repairs, taxes, upkeep, and various other issues. Regardless of the problem in maintaining the joint tenancy, this may not be the best solution. As mentioned previously, severing a joint tenancy will trigger reassessment of the property, resulting in heavy taxes. A better option might be severing the co-ownership through a process known as partition. The two options for this are a “partition in kind” and a “partition by sale” and there are different circumstances where one option may be better than another.
Partition in Kind Vs Partition by Sale
Through a partition in kind, property is divided up and distributed among the owners. Each owner then maintains independent ownership of their respective fraction of the property.
California law requires that an equitable portion is assigned to each member. The land may not always be divided equally, but must be divided fairly. For example, if a property has 20 acres of land, both owners may not receive 10 acres each. If different sectors of the property are appraised as more valuable, it is possible for one owner to receive 15 acres and the other to receive 5 and both to have received equitable distributions. Another consideration courts will make in deciding distribution is each respective owner’s stake in the property in ownership shares. Beyond these considerations, the courts may also look at each owner’s contribution to repairs, taxes, upkeep, and other expenses.
Through a partition by sale, the court orders that the property be sold and each owner receives an equitable share of the proceeds. Again, equitable rather than equal. The division of the sale may be influenced by the same factors that may influence a partition in kind.
Typically, California courts will order a partition in kind over a partition by sale unless a partition in kind does not make sense given very specific circumstances. For example, a single family home wouldn’t make much sense in dividing up and distributing ownership through a partition in kind and would likely be given a partition by sale.
Need an Attorney for a Joint Tenancy Legal Issue?
There are many cases where consulting with an attorney on a joint tenancy legal matter may be beneficial. If you are in a joint tenancy and wish to sever the agreement so that all tenants become tenants in common, you may need to know the possible legal consequences of that decision, including but not limited to reassessment fees. It may also be worth considering a partition in kind or a partition by sale. In either case, attorney representation is beneficial in such matters and can make a real difference in the outcome of your case.
WB Law Group is a reputable law firm with experience in matters involving California real estate law. If you feel you need legal representation, we are happy to review your case and provide consultation.
For questions, or to schedule a consultation, contact us today at 559.431.4888 (Fresno) or 619.399.7700 (San Diego).