Title to Co-Ownership of Real Property Put to the Test When Co-Owners Die or Become Incapacitated

We are seeing more and more cases where a co-owner of a jointly owned investment property retains us after the other co-owner dies or becomes incapacitated (as a result of Alzheimer’s or some other illness or accident).

• In the case of the death of the other co-owner, our client is usually now dealing with a successor trustee, executor or administrator of the estate.
• In the case of the incapacity of the other co-owner, our client is usually dealing with an agent under a power of attorney or a conservator.

In many cases, our client is surprised to learn that the vesting language in the deed to the property does not reflect the client’s understanding or intent regarding their ownership share. And, whilethe incorrect vesting language in the deed can often be corrected easily if identified before the death or incapacity of the other co-owner, it is not easy once the original co-owner is dead or incompetent.

Because of the lack of a relationship with the co-owners successor trustee (in the event of death) or agent (in the event of incapacity), or because of fiduciary duties that are imposed after the death or incapacity of the co-owner, or for any number of other reasons, just a simple correcting of the vesting language in the deed can be problematic and possibly require litigation in the form of an action to quiet title. The situation is complicated further when there is no co-ownership agreement or other signed documents reflecting the co-owners true intention regarding percentage ownership.

Title Vesting Issues Too Common Among Longtime Real Estate Property Co-Owners

Here are just a few of the cases that have come to us in the last year:

• In one case involving residential rental units, the other co-owner died and our client thought that the property was held in joint tenancy and therefore vested 100% in her, only to be challenged by the administrator of the co-owners estate, who claimed that the property was not held in joint tenancy due to a technicality in the vesting language on the deed.
• In another case involving several apartment complexes, our client was not on the deeds for many years even though he had a written agreement to be put on the deeds Our client was not concerned because he trusted the co-owner. The co-owner now lacks capacity and our client is dealing with the co-owner’s daughter (acting as agent under a power of attorney), who so far has refused to execute a deed to put our client on title pursuant to intent of our client and the incapacitated original co-owner.

As we have discussed in prior blogs, the method of holding title to real property in co-ownership situations is critical to make sure that the intent of the co-owners percentage interests is accurate, so that one co-owner’s interest are protected upon the death or incapacity of the other co-owner. The vesting language on the deed must be exactly correct to avoid unintended consequences. In addition, a written buy-sell or co-ownership agreement, reviewed and approved by your real estate attorney, is a must to deal with the rental proceeds and property expenses. Further, a Limited Liability Company may be the best way to hold title. 

There is no substitute for the advice of an experienced real estate attorney to get your co-ownership agreement right. With Bay Area property values skyrocketing the past few years, the risk of incorrect vesting language in the deed, lack of documentation, and proper legal advice and planning can be costly.

If you own property with a co-owner, take action now to codify your relationship and intentions so that your ownership succession plan is agreed to and put in writing.