Legal Question in Real Estate Law in California
IRS liens
My brother and I own a house in Riverside, CA together 50/50. He has lived in the house with his wife for about 30 years. during that time the IRS and Ca Franchise Tax Board have put liens on the house for back taxes which were accrued by my brother. Some have fallen off. An accountant tells me $70,000 in IRS liens are scheduled to fall off in Oct. 2008, leaving $40,000 which amount will fall off incrementally in 2009, 2010, 2011, etc. I called two title companies in Riverside and both told me they could see no liens on the house, that it looked clear and I'd be wasting my money ($700 now) to do a title search). Does the IRS HIDE these liens somewhere? If I transferred the house to my name (essentially bought my brother out), would they magically appear back on the house somehow? Is there an IRS holding tank for liens? Apparently my brother is in an uncollectable status. Also the house was acquired by my brother and me before he married. It was the family homestead. Would his wife have any claim to any part of the property if it were sold? Or if he quit-claimed his share over to me?
3 Answers from Attorneys
Re: IRS liens
If you are serious about obtaining sole ownership someday soon, you should get a preliminary title report anyway, for several reasons outside the possibility of IRS liens. There may indeed not be any, and I don't know of nor can I imagine any reason for the IRS hiding them; but you'll want to pay for good title work at some point in order to be able to get title insurance and to look for other title defects. If your brother had had tax problems, he may have allowed other types of liens to infect his share of ownership, possibly even having borrowed against his interest without your knowledge (rare, but it can and does happen).
Fortunately, it's a fairly strict rule of law that liens attaching to one co-owner's interest do not affect another co-owner's interest.
As to your brother's wife possibly having a community-property interest, I'd recommend as part of any deal with him that you insist that she quitclaim to him just before you buy him out or, even better, to you at the closing of your buy-out.
It's probably better than 50-50 that there is no community property interest, but one could arise if they used community funds to make major repairs or additions, or if there was ever any financing on his interest that was paid off with community funds. A family-law attorney could advise you on this aspect.
Re: IRS liens
That's a lot more than one question. If you want security on the issue, get title insurance, not just a search. It's worth the cost for the peace of mind.
Re: IRS liens
On the issue of community property, under California law, his wife acquires a community property interest the first time he makes a payment on the mortgage after marriage. If the property is sold, the title insurance company will require both you and your brother's wives, if any, to sign quit claim deeds.
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