Co-Owners' Title to California Real Property

Co-Ownership Options

Ownership of real property in California by more than one person is referred to as co-ownership, co-tenancy, or concurrent ownership. There are four basic options to hold title of ownership of real property, and the best option depends upon the characteristics of each option in relation to the goals of the owners.  The options are tenancy in common, joint tenancy, partnership (or corporation or limited liability company), and community property.

1.         Tenancy in Common

A tenancy in common is created when the deed conveying title specifies that the owners are "tenants in common" or "in common."  If the deed does not specify the type of ownership, a tenancy in common may be created by operation of law.  Any number of persons may own property as tenants in common, and their interests may be equal (50% - 50%) or unequal (60% - 40%), but the interests must total 100%. 

Tenants in common may acquire their interests at different times and from different sources, and they may sell or borrow against their interest without the knowledge or consent of the other owners.  The main characteristic of this type of ownership is that there is no right to survivorship.  Therefore, the ownership interest of a deceased tenant in common passes by testate (e.g., will or living trust) or intestate succession (without a will or trust), and not by operation of law to the surviving cotenants.

Unless they have agreed differently as specified in the deed transferring title, all tenants in common have equal rights to the ownership.  They have equal rights of possession to the property, and neither may exclude the other from any part of the property, even if only one tenant is actually in possession of the property.  In other words, if only one tenant actually resides on the property, that tenant cannot exclude other tenants even if they never reside on the property.

All rents and profits, including the appreciation of the property, are shared among the co-tenants in proportion to their undivided interests.  This sharing also applies to any expenses (e.g., taxes and mortgages), and losses in value of the property.

2.         Joint Tenancy

Another common form of ownership is a joint tenancy, and it requires a single transfer that expressly declares that the form of ownership is a joint tenancy (e.g., "as joint tenants" or "in joint tenancy").  Married persons often hold title as joint tenants. To create a joint tenancy, there must be four unities of time, title, interest (must be equal), and possession.  The joint tenancy can only last as long as the four unities of title exist, and if one of the joint tenants unilaterally conveys its interest, then the joint tenancy is severed, and the remaining joint tenants hold their interests as tenants in common with the transferee.

The main benefit of holding title by joint tenancy is the right of survivorship that provides that upon the death of one of the joint tenants, the title of the deceased tenant automatically vests in the surviving tenants by operation of law, with no need for probate.  Therefore, if the joint tenants want the deceased tenant's interest to pass automatically to the other tenant (e.g., husband to wife, or parent to child), a joint tenancy should be used.  If the joint tenants want to be able to bequeath their respective interests by will or trust to another (e.g., husband wants to leave his share to his son by an earlier marriage), then a joint tenancy should not be used.

3.         Partnership

If the persons are investing in real property as a business proposition, then a form of ownership they could use is a partnership.  A partnership is an association of two or more persons to carry on a business for profit, and the real property is owned by the partnership, and not by the partners individually.  The property can only be conveyed in the name of the partnership, and the partners can only use or possess the partnership property on behalf of the partnership.

A partnership may be general or limited, and a similar type of business arrangement that can be used is a corporation or limited liability company.  A corporation or limited liability  company have the advantage of the corporate shield that may provide protection to the shareholders and members that a partnership may not provide.

4.         Community Property

The fourth form of ownership in California is community property, which is typically property acquired by a married person or registered domestic partner during the marriage or domestic partnership while he/she is domiciled in California.  There is a general presumption in California's family law statutes that all property acquired during marriage is community property, and a written agreement (e.g., pre-nuptial or post-nuptial agreement) is typically used to defeat the presumption and make the interests separate property.  Title can be taken in the name of "Joe Smith and Nancy Smith as community property with right of survivorship".

Regardless of the type of co-ownership, each of the owners typically have an equal right to the possession, use and benefit of the entire property.  One of the misunderstandings of some owners is that they can divide the property into separate parcels by defining the percentage of ownership in the title.  But when property is owned by co-owners, the ownership is to the entire property, in the percentages of ownership specified (e.g., Joe as to 70% and Jane as to 30%), or equal shares if no percentages are specified.  One cotenant has no right, absent an action for partition, to force another co-tenant to change the boundaries of the possessory interest.

The ownership of real property can be complicated and the form of ownership should be carefully considered based upon the unique characteristics of each type, and the goals of the parties.