Lesson 5: Co-ownership of Real Property Flashcards
severalty
When a piece of property is owned by only one person, ownership is said to be several, or held in severalty.
It’s helpful to remember that these terms stem from the word “sever.”
Ownership in severalty is ownership severed from all other people—title isn’t shared in any way.
tenancy in common
The default form of co-ownership is tenancy in common (often shortened to TIC).
So if someone transfers land to two or more unmarried people, and the deed doesn’t state a form of ownership, the parties take title as tenants in common.
To avoid confusion, grantors intending a tenancy in common should say so in the deed, adding “as tenants in common” after the grantees’ names.
right to contribution
A co-tenant who pays more than her proportionate share of expenses can require reimbursement from the other co-tenant(s). This is the right to contribution.
right of first refusal
To lessen the risk of unwanted new co-owners (such as a creditor in a bankruptcy), co-tenants may include a right of first refusal provision in their TIC agreement.
This provision requires that before selling his share to an outside buyer, a co-tenant must first offer his share to the other co-owners, on the same terms.
This provision can also apply to involuntary transfers, such as a foreclosure or a bankruptcy sale.
four unities
Another joint tenancy requirement involves four conditions known as the four unities.
If these conditions aren’t met, the joint tenancy fails and the right of survivorship disappears.
The form of ownership defaults to a tenancy in common (or, for married couples, possibly community property).
Unity of possession
Unity of possession requires that all the joint tenants have the right to occupy the entire property (as with a tenancy in common).
Unity of interest
Unity of interest means that all the joint tenants must have the same size of interest in the property.
Unity of time
Unity of time requires that all the joint tenants must take title to the property at the same time.
Unity of title
Unity of title means that all the joint tenants must take their title through a single deed or other instrument.
tenants by the entirety
In the majority of other states, married couples co-own real property as tenants by the entirety, which resembles joint tenancy but is limited to married couples.
Although California does not use tenancy by the entirety, it does have community property with a right of survivorship, which we’ll discuss later.
Community property law
Community property law gives each spouse an undivided ½ interest in most assets (including wages) acquired during marriage.
Requiring the sharing of marital assets is intended to strengthen families. It also protects a non-wage-earning spouse from financial destitution if the marriage ends.
common law marriage
About ten states (not including California) allow formation of a common law marriage.
In these states, two people who live together and hold themselves out as married (for instance, by telling people they are married) for a certain number of years are considered legally married despite the lack of a ceremony or marriage license.
Although you can’t create a common law marriage in California, if a couple is considered married under the common law of another state and then moves to California, the state recognizes the marriage.
joinder requirement
Documents for the purchase, transfer, or encumbrance of community real property (including leases for a period of over one year) must be signed by both spouses.
This is known as the joinder requirement. Failure to get the signatures of both spouses makes the transfer or encumbrance of community real property voidable by the non-signing spouse.
However, state lawmakers carved out an exception for one kind of encumbrance, in reaction to the following case.
community property with right of survivorship
In 2001, California began allowing married couples to take title to property as community property with right of survivorship (CPRS).
This hybrid of community property and joint tenancy provides the tax advantage of community property (the step-up in basis to fair market value on death), while avoiding probate as with joint tenancy.
CPRS has become the common choice for California married couples.
articles of organization
To create an LLC, articles of organization must be filed with the secretary of state.
The articles of organization identify which management structure the LLC has adopted and provide other basic information, much like a corporation’s articles of incorporation do.
