Title and Vesting - Part 2 - Chapters 49-51 Flashcards
Apply the community property presumption when title to property is vested jointly in the names of a married couple
Community property vestings are limited to TWO people and are only available to a married couple or registered domestic partners. All property acquired jointly by a married couple during marriage, no matter how vested, is presumed to be community property, unless the couple clearly state their intention to own their individual interests as separate property. Under the community property vesting, the ownership interests are EQUAL.
Create a joint tenancy vesting based on the four unities in title
Although most joint tenancies are created by married couples, a joint tenancy can exist between non-married persons and is NOT limited to two individuals. Joint Tenants take EQUAL OWNERSHIP INTERESTS int the property. Traditionally, the creation of a joint tenancy requires the conveyance of four unities:
- Unity of TITLE - joint tenants take title by the same instrument, such as a single grant deed or court order
- Unity of TIME - joint tenants take receive interest at same time
- Unity of INTEREST - joint tenants own equal shares in the ownership of the property
- Unity of POSSESSION - each joint tenant has the right to possess the entire property.
Explain the right of survivorship and how it is served
The right of survivorship is provided under both a “community property with the right of survivorship” vesting and a “joint tenancy” vesting.
In JOINT TENANCY VESTING - The death of a joint tenant automatically extinguishes the deceased joint tenant’s interest in the real estate.
In COMMUNITY PROPERTY with the RIGHT of SURVIVORSHIP VESTING - On the death of a spouse, the surviving spouse automatically becomes the sole owner of the property.
Advise on how to clear title of a deceased joint tenant’s ownership by affidavit
To clear title of a deceased joint tenant’s ownership by affidavit the deceased joint tenants interest in the property needs to be cleared from the title before the surviving joint tenant will be able to sell, lease or encumber the property as the sole owner. The new ownership interest of the surviving joint tenant is documented by RECORDING AN AFFIDAVIT declaring the death of the joint tenant.
Recognize the tax aspects of a joint tenancy vesting
A surviving spouse is entitled to a FULLY STEPPED UP COST BASIS (to property’s FMV on the date of the other spouse’s death) in the real estate previously owned by the community without concern for whether the property was vested as a community property (with or without the right of survivorship), as joint tenants or in a revocable inter vivos (living) trust.
Federal law is unconcerned with the form in which title is taken to community property.
community property
Community property is all property acquired by husband or wife during a marriage when not acquired as the separate property of either spouse.
fully stepped -up cost basis
A Fully Stepped Up Cost Basis is the tax basis of community property a surviving spouse receives on the death of a spouse is stepped up to the property’s fair market value (FMV) on the date of death.
joint tenancy = EQUAL SHARE = FOUR UNITIES
Joint tenancy is the ownership of fractional interests in real estate by two or more individuals each holding an equal share with the right of survivorship. When a joint tenant dies, their interest is eliminated and the surviving joint tenants share the remaining ownership equally. Joint tenancy requires the conveyance of the FOUR UNITIES:
- TITLE - take title together on the same deed
- TIME - at the same time
- INTEREST - hold equal shares/interest in the ownership of the property,
- POSSESSION - each has the right to possess the entire property
ratify
To RATIFY means the later adoption or approval of an act performed on behalf of a person when the act was not previously authorized.
right of survivorship
The Right of Survivorship is the right of surviving joint tenants or a spouse to succeed to the entire interest of the deceased co-owner.
set aside
To SET ASIDE is to annul by court order a document transferring an interest in real estate. For example, if one spouse, without the consent of the other, sells, leases for more than one year, or encumbers community real estate, the non-consenting spouse may either ratify the transaction or have it set aside.
The non-consenting spouse has ONE YEAR from the recording of the non consented to transaction to file an action to set aside the transaction.
vesting
VESTING is a method of holding title to real estate. Differences in the types of title vestings present different consequences for persons who have interest in property. Title to real estate in California is held in one of FOUR basic vestings:
- JOINT TENANCY - multiple interests with EQUAL shares
- TENANCY IN COMMON - multiple interests with VARYING shares, no right of survivorship
- COMMUNITY PROPERTY - all prop acquired by a married couple in CA during a marriage
- COMMUNITY PROPERTY WITH RIGHT OF SURVIVORSHIP - identical to comm property vesting but the RofS
Recognize the nexus between a recorded lis pendens describing a parcel of RE and the litigation it references asserting a claim to an interest in title or right to possession of the real estate.
The purpose of recording a Lis pendens is to preserve a person’s rights to the real estate until the dispute with the owner is resolved. Thus buyers who acquire an ownership interest in a property after a Lis pendens describing the property has been recorded, take their interest in the property subject to someone else’s (the claimants) right.
Without a recorded Lis pendens, or physical possession of the real estate, the person who claims an interest in title or the right to possession runs the risk the owner will encumber or convey the property to another buyer, lender or tenant who is unaware someone else already holds an interest in the property.
Understand the interference a recorded lis pendens has on the owner’s ability to convey clear title
A Lis pendens in a buyer’s specific performance action does not interfere with a title company insuring a lenders trust deed which secures a debt in the amount less than the price the buyer will be paying for the property. As a result, property subject to specific performance actions by buyers is often rendered unmarketable while the Lis pendens remains in effect. The tremendous value of the Lis pendens to litigating buyers is its ability to preserve the buyers right to purchase the property. The recording of a Lis pendens often persuades a hedging seller to perform.
Explain an expungement of a lis pendens as the remedy for clearing title of the litigation so the property can be conveyed and title insurance issued
After a lis pendens has been recorded anyone with an interest in the property affected May file a motion asking the court to expunge the lis pendens. Expungement removes from title any restrictions sought to be imposed on title or to possession by the lawsuit.
absolutely privileged publication
An Absolutely Privileged Publication is any statement made as part of the legislative, judicial or other official proceeding authorized by law including a Lis Pendens, barring a slander of title action.
To record a Lis Pendens, the lis pendens is required to:
- IDENTIFY the parties to the lawsuit
- give an adequate DESCRIPTION of the real estate
A Lis Pendens is properly of record when it is FILED and INDEXED in the county recorder’s office of the county where the property is located.
While the OBJECT of the lawsuit and its effect on title or possession of real estate does not need to be stated in the Lis pendens, the OBJECTIVE of the lawsuit is to be stated in the list pendants for it to be considered an absolutely privileged publication.
expungement
Expungement is a court order removing from title to real estate the effect of a recorded Lis pendens regarding litigation asserting a claim to title or possession of the property. Anytime after a Lis pendens has been recorded anyone with an interest in the property affected may file a motion asking the court to remove the Lis pendens from the record called an expungement.
lis pendens
A LIS PENDENS (meaning pending litigation, or Notice of Pending Action) is a notice recorded for the purpose of warning all persons that the title or right to possession of the described real property is in litigation. The purpose of recording a Lis pendens is to preserve a person’s rights to the real estate until the dispute with the owner is resolved. thus buyers who acquire an ownership interest in property after a Lis pendens describing the property has been recorded take their interest in the property subject to someone else’s (the claimants) right.
specific performance action
Specific Performance Action is litigation to compel performance of an agreement. Title companies usually refuse to insure title when a Lis pendens is recorded which involves a Specific Performance Action. Without Title Insurance, buyers will not buy, lenders will not lend and tenants will not occupy the property. As a result, property subject to specific performance actions by buyers is often rendered unmarketable while the Lis pendens remains in effect.
Explain the function of a preliminary title report
A preliminary title report (PRELIM) is a report furnished by the title insurance company in connection with an application for title insurance disclosing the current vesting and encumbrances reflected on public record. A title insurer has no duty to accurately report all title defects and encumbrances on the prelim.
A prelim is NOT a representation of the condition of title and CANNOT BE RELIED ON by anyone and imposes no liability on the title company. Thus, a prelim is no more than an offer to issue a title insurance policy based on the contents of the prelim and any modifications made by the title company before the policy is issued.
Distinguish between a preliminary title report and an abstract title
Unlike a prelim, abstract of title are written statements which MAY BE RELIED ON by those who order them as a accurate, factual representation of title to the property being acquired, encumbered or leased.
abstract of title
Unlike a prelim, abstract of title are written statements which MAY BE RELIED ON by those who order them as a accurate, factual representation of title to the property being acquired, encumbered or leased.
An abstract of title is a “Statement of Facts” collected from the public records. An abstract is not an insurance policy with a dollar limit on the insurer’s liability as is set in a policy of title insurance.
The content of an abstract is intended by the insurance company to be relied upon as fact. Thus, the insurer is liable for all money losses of the policyholder flowing from a failure to accurately State all conditions of title in the abstract they issue.
date-down search
A DATE-DOWN SEARCH is a further search of the public records performed by a title insurer after preparing a preliminary title report and immediately prior to issuance of a policy of title insurance. The prelim and a last-minute date down search of title conditions, are used by escrow and the title insurer to reveal any title problems to be eliminated before closing and, as instructed, obtain title insurance for the documents when recorded.
After the date down search if any defects or encumbrances show up that were not included in the prelim, the title company may withdraw its offer under the prelim. The title company then issues a new prelim offering to issue a policy on different terms.
preliminary title report (PRELIM)
A PRELIMINARY TITLE REPORT (prelim) is a report constituting a revocable offer by a title insurer to issue a policy of title insurance, used by a buyer and escrow for an initial review of the vesting and encumbrances recorded and affecting title to a property.
Encumbrances reflected on a preliminary title report include:
- General and special taxes
- assessments and bonds
- CCnRs
- easements
- rights-of-way
- lien’s
- interests of others
A preliminary title report also known as a prelim is not a representation of the condition of title or a policy of title insurance. Unlike an abstract of title, a prelim cannot be relied upon by anyone and imposes no liability on the title company.