Legal Question in Real Estate Law in California

He can't add you to the deed of his house, because the deed has already been given and recorded. He can, however add you as an owner of the house by executing and recording a new deed from himself to himself and you together. There are many reasons, however, that you two might not want to do that. Most immediately, it will result in the two of you being charged a documentary transfer tax on half the value of the property. Second, if there is more than $26,000 in equity in the property, he will be subject to gift tax. If the reason to put you on title as an owner is to protect your security interest in the property, you both might be better off if he gives you a deed of trust for the amount you put in the property, payable if and when he sells the property. There may be reasons it would be worth the tax consequences of putting you on title, so don't take me to be saying don't do it. Just look at all the options before making a choice of how to document things.

The best way to get security for the repayment of a loan to buy real property is usually to get a promissory note secured by a deed of trust on the property. I say usually because the lender has to look to the real property in case of a default on a deed of trust, and nowadays real property's collateral value is dicey. Also, the best time to take a house as collateral is at the same time (in the same escrow) as the house is bought and the loan funds plunked down. However, you can always have him give you a note and deed of trust, even if it is after the loan is made. When recorded, the deed of trust will be junior to anything else that's been recorded against the property in the meantime.

But this isn't what you asked. I think you want to know whether he can add you to title as a co-owner. Yes, that's very easily done, but there are at least three reasons why he maybe should not do that. The first is that it may be a violation of the terms of any existing loan on the property (other than yours). Most residential loans have so-called "due on sale" clauses that say the loan has to be paid off if the owner/borrower sells or gives away the property (the collateral) or any interest therein. Lenders may waive their rights under due-on-sale clauses upon written request, sometimes for a processing fee, or possibly if you did go on title the lender might not notice or if it did notice it wouldn't care, but this is reason #1 not to go on title.

The second reason is that sharing ownership of real property is a serious step and often results in a hard-to-unwind entanglement, whether or not the loan is paid on time or goes into default, and a co-owner of a minority interest probably has to go to court to force a sale to have recourse for the borrowing co-owner's default.

The third reason is that co-ownership entails co-responsibility for things like property taxes, and if you don't live there, you may not want that.

Finally, if you accept co-ownership, note that in doing so you may be accepting the co-ownership position as satisfying the loan, instead of providing you with a strange form of collateral for your loan. You should insist upon documentation that confirms and ratifies your intentions -- are you accepting the part ownership in satisfaction of the loan, or are you accepting it as an oddball way of securing your loan?