Legal Question in Real Estate Law in California

You are in a potentially bad situation. You need to discuss with a lawyer why you are not on title and not on the loan, before a solution can be crafted to remedy your situation. Right now if you and your partner have a falling out, or if the three-way partnership breaks down, you could lose much if not all of your investment and have to sue your partner for your contribution. You are also giving up tax benefits that you may not know about or not intend to give away to the other people. This kind of investment can be a good one for the people involoved, but if they go bad and they haven't been documented properly up front, they usually wind up in nasty litigation and everyone loses money. Even if you don't want to retain counsel to draft up your documents, give me a call to discuss the details of your situation and let me point you in the right direction. As a litigator I probably shouldn't help people avoid litigation, but there's enough work out there without letting people make more because they don't know how to set things up right from the beginning.

And your question is . . . - just kidding. You actually need to do two things. First, you are correct that you need a contract between you and your partner in the transaction. In fact, it would be extremely wise if all partners in the project put together an agreement that covers many aspects of the transaction - who is responsible for payment of what; what happens if one partner cannot pay their share of the costs of operation of the property; what happens if one of the partners dies, or otherwise becomes incapacitated; what happens if a partner wants to be bought out; how are the property taxes re-apportioned if one partner sells their share, thus increasing a portion of the property taxes; and so on - there are 100 different permutations of this deal that you need to address in a written contract between all partners. I see these "tenants in common" (TIC) deals all the time, but 99% of the time it is after things go wrong, and there is no agreement between the parties which governs what is to happen. The law on TICs is very complex, and frankly, I can almost guarantee it is not what you think it is, therefore, without an agreement between the parties, you default to California TIC law, which is almost certainly NOT what you intend to happen.

By way of example, the members of a TIC have no say in whether or not another TIC member sells his or her interest, cannot "approve or disapprove" of the new buyer, and the increased property taxes as a result of that sale are generally split among all owners, even though the new TIC member is the one who triggered the increase. You need to thoroughly understand what the current state of the law is, and then hire a professional to draft an agreement that covers items you all agreed to.

Finally, with respect to your 1/2 of 1/3 share in the property, you need to have your partner deed her 1/3 interest to her and yourself. If you are not on title to the home, you have at best an equitable claim to title, which will require a lawsuit to enforce. With no other agreement between the current owners, your partner should have no problem deeding the property to the two of you - s/he is deeding only his/her 1/3 interest, and it does not affect the ownership interests of the other members. They may not like it, as it could trigger a re-assessment of 1/3 of the property, but you need to be in the chain of title, or your claim to ownership is weak at best.

I strongly recommend you hire a real estate attorney to assist you with this - if you do not, the consequences of not getting this right are pretty dramatic. I've had to file lawsuits between brothers and family members over failure to document the understanding of ownership interests in TICs, so just beware that doing nothing is not a good option.

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