Legal Question in Real Estate Law in California

Re: Ending a finanical and residential relationship

Your proposed agreement should work fine for the personal property items. Just keep in mind that an agreement between the two of you will not affect the rights of a creditor.....whoever owed the money to the store or credit card company before the agreement will still owe them after the agreement.

Now, as to the real property. The deed and the loan present separate, but intertwined, problems. As to the deed, the first question is how is the property held? Probably as tenants in common, and my answer assumes this, although some other form of ownership is possible.

As co-owners, neither of you is in a landlord-tenant relationship to the other. You both have equal rights to possession of the entire property. One straightforward way to terminate the right of possession of Owner A is for A to sell his 1/2 interest to Owner B by grant deed, although a quitclaim will also work. This seems to be what you've agreed upon. Another possibility would be to sell the house to a third party.

In any event, the real-property transfer needs to be in writing, signed and notarized, and recorded. I strongly recommend the assistance of an attorney, but at minimum maybe a real-estate broker or title company could handle this.

As I mentioned, you have a related problem with the loan. The party who is giving up ownership is going to want, and rightfully so, to be off the hook for the loan. Further, there may be a term in the loan or deed of trust limiting the right of one co-owner to sell, even to the other co-owner. Therefore, it is imperative that you negotiate with the lender. The loan will have to be rewritten in some way or other, and as a practical matter your easiest way out may be to refinance, but maybe that can be done with the original lender at some saving in paperwork. The new loan would pass through escrow along with the deed transferring the 1/2 ownership, and you would emerge with one owner and one borrower, and possibly a better interest rate to boot.

There are several reasons for referring the matter to a real-estate lawyer in the county where the property is located. These include the proper documentation of the ownership transfer, the unwinding of the loan/refinancing, and placing some of the agreement-drafting and deal-making responsibility in the hands of a professional.