By Karen Corbelli
As summertime approaches, and the real estate market starts to show signs of life, the thought of buying a home or even selling the one you have might be becoming a viable option. But property transfer can be tricky business – subject to often underestimated legal and tax consequences – and it’s important you know how to do them correctly. It’s a complex task, but we can hit a couple of the larger points.
First, let’s talk about some common deeds. Deeds are the documents that transfer ownership of real property. In California the most common types are grant deeds and quit claim deeds. Here is a brief overview of each:
Trust deeds
Trust deeds are the most common method of financing real estate purchases in California (most other states use mortgages). They come into play when someone uses real property as security for a loan, which is almost anytime someone buys real estate. Used in conjunction with a promissory note (a written promise to pay back a loan), the trust deed transfers the title of the property to a trustee – often a title company – who holds it as security for a loan. When the loan is paid off, the title is transferred to the borrower. The trustee will not become involved in the arrangement unless the borrower defaults on the loan. At that point, the trustee can sell the property and pay the lender from the proceeds.
Grant deeds
Grant deeds are a form for the conveyance of interest in real property, and are commonly used. Grant deeds imply certain warranties – namely that the title being passed hasn’t already been transferred to someone else or been otherwise encumbered, except as specified in the deed. Therefore, at the time of the conveyance, the property is free from any liens allowed to be placed on the property by the grantor or grantor’s agent.
Quit claim deeds
Quit claim deeds transfer whatever interest or title a grantor may have, without warranty, and conveys only such rights as the grantor has at the time of conveyance. They are commonly used when someone has a theoretical claim to real property; the potential claimant gives up the claim and the property’s owner doesn’t have to worry about the claim being made later. Though similar to grant deeds, quit claims don’t guarantee the title is free from other encumbrances.
Now we can discuss ownership, which is inherent in the type of deed. The law sees property ownership as a package of distinct “ownership interests,” that can be split many different ways, and pieces of property ownership can be given to different people.
Shared ownership. This includes: joint tenancy (when two people, often spouses, have equal rights and want to avoid probate), tenancy-in-common (two or more people who want their interest in the property to be left to somebody other than the remaining owners, of if ownership is to not be equal, this holding requires probate) and community property (when spouses are granted equal share of the property to be passed by will to whomever they grant, and comes with some tax advantages for the heir). In any case, each party on the deed is designated as a partial owner of the whole interest in the property.
Easements. These are legal rights that allow somebody who is not on your deed to use part of your land subject to certain conditions. For example, allowing your neighbor the right to run a water pipe or walking path over a certain part of your property. The neighbor would then be able to use those specified parts of your property as long as they abide by the conditions you have set in place. And as an easement owner the neighbor is essentially a co-owner, though this is not referred to as such in normal conversation. You are legally obligated to take his rights into consideration before you transfer the property.
Hopefully this helped to clarify some common questions and misunderstandings associated with property transfers.
Make sure these key issues are covered before you commit to any transfer:
* Property ownership
* Lender policies
* California’s Real Estate Disclosure laws
* Tax implications of transfers
This article is for information only and not to be taken as legal advice or counsel.
Karen Corbelli is a Redding-based legal document assistant armed with more than 20 years of legal experience. She can be reached at 515-5081 or kjparalegalservice@yahoo.com.
