Ownership of Real Property by Same-Sex Couples in California

Steven J. Mehlman

As the constitutionality of Proposition 8 and same-sex marriage continues to work its way through our legal system, attorneys with real estate, family law, probate and civil litigation practices regularly encounter clients seeking legal advice or representation related to the co-ownership of real property by same sex couples. As with heterosexual relationships, breakup or death are the two possible endings for homosexual relationships. The manner in which property is held affects the outcome of co-owned property between same-sex couples, just as it does with opposite-sex couples.

Manner of Holding Title Or Ownership By Multiple Parties

Since its enactment in 1872, California Civil Code Section 682 has defined four types of ownership interests in real property by multiple persons: 1) joint interests; 2) partnership interests; 3) interests in common; and 4) community interests of husband and wife.  The California Domestic Partner Rights and Responsibility Act of 2003, effective January 1, 2005, resulted in extending the community property interest so that registered domestic partners after that date can also have a community property interest in the common residence[1], among other property.  The key attributes of each type of real property ownership by multiple persons[2] are further defined by other Civil Code provisions as follows:

A.    Partnership interests are owned by several people who are in a partnership and the property is used for partnership interests. (Civil Code §684).[3]

B.     Interests in common (also commonly referred to as tenancy in common) are created by default when several persons acquire the property, but not expressly in joint interest, as community property or in partnership. (Civil Code §§685-686). The parties may own unequal shares, which should be set forth in the deed.

C.    Joint interests (also commonly called joint tenancies) are owned by two or more people in undivided equal shares and are created by a single will or transfer when expressly declared as joint tenants. (Civil Code §683). The primary characteristics of joint tenancy are that the property must be held in equal shares and there is a right of survivorship. When one joint tenant dies, the entire estate automatically belongs to the surviving joint tenant(s) by operation of law.  Since, upon death of a joint tenant, the deceased joint tenant’s interest in the property automatically passes to the other joint tenant(s), that interest is not a part of the deceased joint tenant’s estate, and cannot be disposed of by will or probate. The only exceptions to this rule are the simultaneous death of all joint tenants or the murder of one joint tenant by another.

D.    Community interests (also commonly called community property) apply to property acquired after marriage or after becoming a registered domestic partnership. (For domestic partnership see Family Code §297 et seq)  Community property provides for equal ownership interests between the spouses or domestic partners (absent a community property agreement to the contrary) but does not have a right of survivorship. Any community property, at the time a spouse or registered domestic partner dies, would be subject to probate.

In 2001, the California legislature created a subtype of community property interest, known as “community property with right of survivorship” that is similar to a joint tenancy, but requires that the joint tenants be married or be registered domestic partners. Community property with right of survivorship must be expressly stated in the deed.  It creates the right of survivorship afforded in a joint tenancy to the community property. However, the creditors of the deceased spouse/registered domestic partner have rights against the deceased’s interest, just as they would in a normal community property situation (whereas they would not in a joint tenancy).  There may also be tax advantages afforded by a community property with right of survivorship interest as opposed to a joint tenancy for which clients should consult their tax attorneys, CPAs or tax advisors.

If a married couple or a registered domestic partnership wishes to have the property that was acquired during the marriage or domestic partnership be in the sole ownership of one of the individuals, the title company will typically require the non-owning member of the couple to relinquish his or her rights to the property such as by signing and recording a quit claim deed.

Both married couples and registered domestic partnerships have an array of rights and responsibilities concerning community property (including real property acquired during the marriage or registered domestic partnership) during the period of ownership of the property and at death or dissolution of the marriage or registered domestic partnership.  Such rights include the right of management and control of community property, a community property interest on dissolution of the relationship, or an interest in the community property of the decedent’s estate.  (Family Code Section 297.5)

Avoiding Probate for Same Sex Couples in California

As discussed above, there are two methods for avoiding probate in California:  joint tenancies and community property with rights of survivorship.  In order to be able to create a community property with rights of survivorship interest, the parties must be married or in a registered domestic partnership.  Both of these types of interest allow one party’s interest to pass to another party and any property owned in such an interest would not be subject to probate.  However, both of these types of interest require that the deed expressly declare either the joint tenancy interest or the interest as community property with a right of survivorship.  Accordingly, a deed that did not expressly contain such language would create a tenancy in common.  Such a deed would require that the property be probated on the death of one of the title holders.

An alternative method for avoiding probate would be for the parties to have a living trust and to deed the property to the trustee(s) of the living trust to be transferred pursuant to the provisions of the living trust.  Partners in a same-sex relationship, who own property together, should consult with an estate planning attorney, just as same-sex couples who own property together should do so to consider whether to create a living trust. Properties for which title is not held in joint tenancy or community property with a right of survivorship would have to be probated on one of the death of one of the parties, absent a living trust.

Division of Property Rights Upon Termination Of A Relationship Between Same Sex Couples

When property is held in either joint tenancy or community property with rights of survivorship, whether by same-sex or opposite-sex couples, the joint ownership may be terminated by five methods:

  1. A unilateral conveyance of an interest to a third party
  2. A recordation of a written declaration
  3. A decree of partition
  4. A judgment
  5. An execution sale

A severance of a joint tenancy extinguishes the right of survivorship and the parties thereafter hold title as tenants in common.  A termination of the right of survivorship with community property reverts the property to community property without survivorship rights.  Both parties would then hold a one-half interest in the property as tenants in common (or community property, if the right of survivorship is revoked from a community property with rights of survivorship), which would permit each cotenant (or spouse/registered domestic partner) to make a testamentary disposition of his or her interest in the property.

Couples who have registered as domestic partnerships in California who wish to terminate the registered domestic partnership can do so by either preparing and filing a Notice of Termination of Domestic Partnership form with the California Secretary of State in certain circumstances, or at least one of the partners must file a petition with and obtain a judgment from a California Superior Court similar to the termination of a marriage.[4]  If the parties terminate their registered domestic partnership, part of the court proceedings include a determination of community property.  Community property is assigned a fair market value, and after taking into account community obligations and debts, the community property is distributed equally among the parties.  The disposition of the property can be decided between the parties in a property settlement agreement, or determined by the Court.  Under California law, unless the parties clearly express intent to keep the right of survivorship, it is automatically terminated at the termination of the domestic partnership.  This is true for both joint tenancies and community property with rights of survivorship.  (Probate Code Section 5601.)

Once a right of survivorship is terminated, or in a tenancy in common, a party has a right to partition; to segregate and terminate common interests in the same parcel of property.  A partition may be either a judicial decree or may be a voluntary agreement of the parties.  While the parties may agree to a partition non-judicially, each party with an interest in the property has an absolute right to partition the common property through a court partition proceeding.

In a partition action, the Court may physically divide the property.  However, that is often not possible, so the alternatives are for one party to buy the other party’s interest in the property or for the Court to order the property sold.  If one party is buying the other out, it is usually to the advantage of the parties to have the property appraised and to reach an agreement as to the transfer price rather than to proceed with a partition action, which would be expensive and time consuming.

If the property is to be sold, California Code of Civil Procedure Section 873.820 specifically describes the manner in which the proceeds of a sale from a partition are to be divided, as follows:

 “The proceeds of sale for any property sold shall be applied in the following order:

(a) Payment of the expenses of sale.

(b) Payment of the other costs of partition in whole or in part or to secure any cost of partition later allowed.

(c) Payment of any liens on the property in their order of priority except liens which under the terms of sale are to remain on the property.

(d) Distribution of the residue among the parties in proportion to their shares as determined by the Court.”

The transfer of an interest where registered domestic partners are terminating their relationship would not cause a re-assessment of the property’s value, just as it would not if the property was transferred pursuant to a property settlement agreement in a divorce action.[5]

Avoiding Disputes Between Couples Who Are Not Married or Registered Domestic Partnerships

California does not recognize Common Law Marriage, or any equivalent for domestic partners, but there are other bases under which a person can claim to have acquired an interest in the real property that was owned by his or her partner before the relationship began or was acquired by the other individual in the relationship.  These include such things as making contributions towards the mortgage, maintenance costs, or improvements, jointly pooling earnings and accounts to pay common expenses, and performing services for the other individual in the relationship or which improve the property. These factors can have a significant role where title is held in tenancy in common, or in a partition action, where the court can determine the respective shares to be received by the parties.

Marvin v. Marvin (1976) 18 Cal. 3d 690 also leaves open the possibility for the Court to find that an express agreement exists between co-habitants which is  enforceable except to the extent the contract is explicitly founded on the consideration of meretricious sexual services. The Court further held that in the absence of an express contract, the Court could inquire into the conduct of the parties to determine whether the conduct of the parties demonstrates an implied contract, agreement of partnership or joint venture, or some other tacit understanding between the parties.  While a discussion of Marvin and subsequent cases is beyond the scope of this article, one method for avoiding disputes, in addition to carefully choosing the manner in which title is held, would be to have a clear co-ownership agreement between the parties which addresses ownership, capital contributions, contributions for on-going maintenance,  improvements, mortgage, taxes, insurance, and other property related expenses, and any division of proceeds from the property in the event the relationship ends or the property is sold.

Steven Mehlman has over 30 years of experience as an attorney handling civil litigation and transactions in the areas of real estate and business. Mr. Mehlman engages in a broad real estate practice, including transactions for the purchase or sale of real property as well as disputes and lawsuits that arise from such sales, such as non-disclosure of material defects, breach of contract and construction defects. He also handles land use and zoning issues, neighbor problems, and residential and commercial landlord/tenant matters including leases and unlawful detainer actions. As an attorney who handles both transactions and litigation, Mr. Mehlman strives to avoid disputes through clear and enforceable contracts between the parties and with respect to how parties take title. He can be reached at steven@mehlmanlawgroup.com

[1]   Having a “common residence” is the first pre-requisite in Family Code §297(b) for filing a Declaration of Domestic Partnership with the Secretary of State, although the common residence need not be owned by both members of the couple.

[2] Multiple parties can also form other entities, such as corporations or limited liability companies that can then purchase a property, but that would be ownership by the entity, and not ownership by multiple parties, as the multiple parties would have personal property ownership in the stock or membership interest of the entity. There are also stock cooperatives and common interest developments, such as condominiums, that can result in an ownership interest with others

[3]   The property may be held in the partners’ names or in the name of the partnership by recording a statement of partnership. .

[4]   Couples in registered domestic partnerships should consult with a family law attorney, but for a General Description of the process download the brochure Terminating A California Registered Domestic Partnership on the California Secretary of State website.  See http://www.sos.ca.gov/dpregistry/forms/sf-dp2.pdf

[5]   The state law excluding re-assessment of the property for registered domestic partners originally effective January 1, 2006, was made retroactive in 2007 for property transfers between registered domestic partners that occurred between January 1, 2000 and January 1, 2006, so that parties in this situation can apply for relief on a retroactive basis. The exclusion from re-assessment may also apply to couples that registered as domestic partners in states other than California which have laws substantially equivalent to California domestic partnership law, but owned California property.  The exclusion also applies to property held in a living trust which transfers pursuant to the trust provisions, if the transferee was a registered domestic partner to the decedent at the time of death.

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