This Time the Courts Got It Wrong

by | Aug 24, 2016 | Firm News

From time to time I write about a new court decision of interest to real estate and construction professionals, and punctuate my comments with the observation that the courts are not stupid and cut through the technical and procedural to get to what is really just. Not this time.

A man and woman, not married, bought a home together as tenants-in-common, 2/3 to the man, 1/3 to the woman, based on what they contributed to the downpayment. When they refinanced, they deeded the house to themselves as joint tenants. Subsequently, they broke up, and the man sued to partition the property, seeking that either the other owner by him out or that the property be sold and the net proceeds divided. While the lawsuit was pending, the man died. The woman asserted that, since the joint tenancy had not been terminated, she was the sole owner of the property.

The trial court and the Court of Appeal both held that the lawsuit the man filed before he died was not enough to terminate the joint tenancy. Civil Code 683.2 includes a list of ways one member of a joint tenancy can terminate the joint tenancy and the right of survivorship. One is to record a deed to himself terminating it or a declaration stating that the joint tenancy is terminated. Civil Code 683.2 says that list of ways to terminate a joint tenancy is not exclusive. Nonetheless, the trial judge and three appellate justices all held that the man’s filing of a lawsuit to partition the property was not enough to cancel the joint tenancy.

Recording a deed or declaration to end the joint tenancy and the right of survivorship, would have cost about $20.00 in recording fees, $10 for the notary, and maybe $50 or $100 to have an attorney prepare that deed. The lawsuit must have cost at least $1000. Why not spend $100 to record a deed or declaration? What was the attorney thinking?

The only reason to hold property in joint tenancy is to avoid the expense, delay and aggravation of probate court proceedings. A better way to accomplish this is to create a revocable living trust and deed the property into the trust. Since the property is owned by the trust, when the person who set up the trust passes away, the successor trustee just distributes the property as instructed in the trust document, with no probate. Since it’s revocable, the trustor can amend it, add property to it, take property out of it, or even cancel it, without a notary and without recording anything.

If you need to cancel a joint tenancy or set up a revocable living trust, call me.