Legal Question in Real Estate Law in California

I recommend that you review your loan agreement carefully.....nearly all note+deed of trust financings contain a so-called "due on sale" clause under which the lender can, and sometimes will, make the entire loan immediately payable if there is any transfer of ownership, including a gift of a fractional interest to a spouse or child. Most lenders will negotiate to give you permission for a sale such as you propose, but get their agreement in writing first ....... and they may charge you a small fee to process the paperwork.

Also, I would advise you to investigate the tax consequences of your proposed sale, both as to property taxes and state and federal capital gains. Will you be creating a gain or loss, or are you selling the 25% interest for no gain or loss?

Finally, perhaps needless to say, you need to have a comprehensive written agreement with your buyer as to how the property will be shared, who makes decisions regarding future sale of the property, how maintenance decisions and expenses, property taxes, etc. will be handled, and so on.

I agree with Mr. Whipple entirely. I write to add that will not be able to separate out a 25% share out of the 50% share of the equity. It doesn't work like that. If you sell a 25% share, it will be subject to a 50% encumbrance even if you get the lender's consent. So to sell 25% of the equity, you have to sell 50% ownership, unless the lender is willing to subordinate their deed of trust to a deed of a 25% interest. Unless you are doing major investment grade commercial real estate transactions, no lender would even talk to you about that. And even in that case, they would probably require some kind of pay-down out of the sale proceeds.

While I agree with the answers provided, you also have a significant economic issue. It is most unlikely a third party purchaser will pay you without a substantial discount for an undivided interest. It gives the buyer the right to file a partition action to force sale, but being a co owner with others when you have little or no control over the property is a difficult and expensive position to be in.

It is unclear from your question what you intend to sell. If it is a 50% interest, but subject to a mortgage, that is one analysis. If it is really a 25% interest ( i.e. 1/4 of the property that is subject to the mortgage), the minority position greatly decreases value. And after your sale you get ownership in either case with someone who has the right to be on the property rent free and who can force a sale of the entire property whether you want to sell or not.

The fact that you may be able to sell certainly does not mean the proposed transaction is a good idea. For example, I can see buying your minority intererst for one half of its proportionate value because of all the problems described, and then forcing a sale almost immediately. If the property is worth 100, and has a mortgage of 50, 1/2 would at most be worth 25 ( 100 - 50 = 50 x 1/2 = 25) I would certainly pay you no more than 12.5 for such an undivided interest in real estate. Once I own my share I could force a sale ( which may cost me some legal fees) and I would get 25 as my share of the sale proceeds. I could double my money in no time.