Legal Question in Real Estate Law in California
My deceased father's house, was left to his four children. The Judgment has 3 of the children 26% ownership and the third 22%. My brother who is a 26% owner owes California Franchised Tax Board over $300,000. Although the lein is not on the house title itself, it against him and is showing up on his part of owneship. The Title Company is stating that the house can not be sold with clear title until the CA Tax Board accepts his portion as partial payment. He is now trying to Quit Claim off of the Deed.
The Title Company states that the house still cannot be sold with clear title until the CA Tax Board has been notified and accepted because he was the owner when this Lien was put on his portion of ownership.
Can a person Quit Claim a Deed to anyone of their choosing, when there is three other owners? By Quit claiming does this void this tax lien and allow others to sell with clear title? The lien is approxiamatly four times more that what the property is valued at. Can someone please help me with this. I do not want to get involved in something that is illegal or unethinical.
Thank You
1 Answer from Attorneys
The title company is correct in telling the sellers that the buyer would not get the clear, marketable title which a buyer may expect and demand. Property can be sold with liens and clouded title, but only if the buyer waives the problems and accepts title "as is," which few will do.
The tax lien is doubtless a lien against all property, assets, income, etc. of the debtor brother (subject to limited statutory exemptions), and will be on the public record indexed by his name, and the lien will show up in a title search because the preparer of the preliminary title report will look for his name after his name turns up as a co-owner or as a seller.
Ordinarily, a lien against a co-owner does not affect the interests of other co-owners - i.e., the lien doesn't attach to the other owners' interests in the property - but it does make selling more difficult.
A partial owner of a piece of real estate can sell what he owns - in this case, a 26% interest - but in this case he would be advised not to for at least three reasons. The lien would still attach to the 26% interest in the hands of the buyer; the transfer could be fraudulent under the Uniform Fraudulent Transfer Act (Civil Code section 3439 et seq.); and it could adversely affect the pending sale to a third party.
The title company is an important player here because it will decide when title is sufficiently good to allow it to issue title insurance for the buyer and perhaps its lender as well, and its legal and underwriting staffs will need to give the go-ahead. My guess is that the debtor brother will be asked specifically to authorize all of his share of the proceeds to go to the FTB, and in exchange for that, the FTB will deliver some kind of a release to escrow that will allow the deal to close and title insurance to be issued.
It should be made clear to the debtor brother that quitclaiming away his share of title will not dispel the lien on that 26%, and in fact could result in even more assets being subject to the lien, namely, the 26% interest and additionally any cash he got from a sale.
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