Title and Vesting - Part 4 - Chapters 27-28 Flashcards
Apply the community property presumption when title to property is vested jointly in the names of a married couple
Community property vestings are only available to a married couples or registered domestic partners (RDPs). 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.
Both spouses need to consent to the sale, lease for more than one year, or encumbrance of Community Real Estate regardless of how it is vested. When Real Estate held in a joint tenancy vesting is separate property (for example the joint tenants are not a married couple or are married and in writing agree their interest are separate property), each joint tenant may sell or encumber their interest in the real estate without the consent of the other joint tenants.
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. Traditionally, the creation of a JOINT TENANCY requires the conveyance of FOUR UNITIES of TITLE, TIME, INTEREST, AND POSSESSION.
Explain the right of survivorship and how it is severed
Every co-owner vested as a joint tenant or as community property with the right of survivorship has the right to unilaterally sever the right of survivorship. The severance by a co-owner terminates the right of survivorship held by the other owner in that co-owners severed interest.
Severance is a vesting issue. To sever the right of survival, the co-owner prepares and signs a deed as a grantor from themselves “as a joint tenant” or “as community property with the right of survivorship” back to themselves as the grantee. On recording the deed revesting of the owner’s interest, the right of survivorship is severed.
Alternatively, the co-owner may transfer title to themselves as trustee into the co-owners revocable inter vivos living trust agreement. The conveyance into the trust vesting also severs the right of survivorship.
Further any transfer of a joint tenants interest in the joint tenancy property to a third party, such as from a joint tenant parent to a child, automatically sever’s the joint tenancy.
Advise on how to clear title of a deceased joint tenant’s ownership by an affidavit
The right of survivorship is provided under both a community property with the right of survivorship vesting and a joint tenancy vesting. The death of a joint tenant automatically extinguishes the deceased joint tenants interest in the real estate. However, the deceased joint tenants interest in the property needs to be cleared from the title before the surviving joint tenants 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.
A surviving spouse with an uncontested claim to sole ownership needs to wait ___40 days_____ before they may clear title in their name and sell, lease or encumber the property.
Discuss the tax aspects of a joint tenancy vesting
Every co-owner vested as a joint tenant or as community property with the right of survivorship has the right to unilaterally sever the right of survivorship. Recording is necessary to terminate a joint tenants right of survivorship. A surviving spouse is entitled to a fully stepped up cost basis in the real estate previously owned by the community without concern for whether the property was vested as community property, as joint tenants, or in a revocable inter vivos living.
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.
community property
COMMUNITY PROPERTY is all property acquired by spouses during a marriage when not acquired as the separate property of either spouse. Recognizing the community property aspect of a married couple’s funds accumulated during the marriage, and agent advises their couple they need to take title as:
- “a married couple as community property with right of survivorship” or
- “a married couple as joint tenants”
An agent will explain the two vestings are identical for future conveyancing purposes since:
- both vestings may be severed before death by either spouse to provide for an alternative distribution of each spouse’s ownership interest to others by will, an inter vivos living trust agreement, or another vesting of their interest and
- on death the title is cleared of the deceased spouse’s interest by the surviving spouse recording an affidavit declaring the death of the deceased spouse and attaching a certificate of death.
vesting
VESTING is a method of holding title to real estate, including tenancy in common, joint tenancy, community property and community property with the right of survivorship.
joint tenancy
JOINT TENANCY is an ownership interest in property concurrently received by two or more individuals who share equally and have the right of survivorship. Although most joint tenancies are created by a married couple, a joint tenancy can exist between non married persons. Conversely, community property vestings are only available to married couples or registered domestic partners.
Traditionally the creation of a joint tenancy requires the conveyance of four unities:
- Unity of Title - meaning the joint tenants take title to the real estate through the same instrument, such as a single grant deed or court order
- Unity of Time - meaning the joint tenants received their interest in title at the same time
- Unity of Interest - meaning of joint tenants own equal shares “or interest” in the ownership of the property
- Unity of Possession - meaning each joint tenant has the right to possess the entire property.
set aside
SET ASIDE is to annul by court order a document transferring an interest in real estate. As Community Real Estate, both spouses need to consent to the sale, lease for more than one year, or encumbrance regardless of how the couple’s interest is vested. When 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 transaction to file an action to set aside the transaction.
ratify
To RATIFY is the later adoption or approval of an act performed on behalf of a person when the act was not previously authorized.
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 on the date of death.
Understand a buyers use of a purchase lien when a seller breaches a purchase agreement
From the moment a buyer enters into a purchase agreement with a seller to acquire property, they have an EQUITABLE OWNERSHIP interest in the seller’s property, which entitles the buyer to a statutory lien against the property or amounts paid on the purchase price when the seller fails to deliver as agreed.
The purchaser’s lien is for the amount of payments made on the purchase price, plus expenditures made to improve the property and pay property taxes and insurance premiums.
The right to a purchaser’s lien for monies paid includes situations where the seller:
- fails to deliver the property as agreed
- interferes with the buyer’s right to possession
- fails to sign and deliver agreements or documents
- induces the buyer to enter into the purchase agreement by misrepresentation
- attempts to avoid their performance on the purchase agreement
Identify when a buyer may and may not use a purchase lien to recover monies paid toward the purchase price of real estate.
Additionally, a buyer is not entitled to a purchaser’s lien when a seller’s non-performance is excused due to a breach by the buyer.
The buyer is entitled to a purchaser’s lien which they may foreclose on the property they reconvey to the seller as part of the recovery process called rescission and restoration.
The right to a purchaser’s lien permits a buyer to record a Lis pendens on the property purchased while seeking a court-ordered foreclosure of the property to satisfy the purchaser’s lien. The seller’s property under contract with the buyer is considered security for repayment of the money the seller owes the buyer. Any deficiency in the property’s value after the Foreclosure sale becomes a money judgement against the sellar.
The priority of a purchaser’s lien on title is set as of the date the buyer takes possession under the purchase agreement, called the RELATION BACK THEORY.
rescission
RESCISSION is the termination of an agreement or transaction from its inception by mutual consent of the participants to the agreement or transaction, or buy one participant based on fraud or misrepresentation of another participant. For example a buyer demands that the seller return all monies paid on the purchase price, the cost of the additional improvements and the property taxes and insurance premiums, and action called rescission.
