Holding title to real property can be structured several different ways, and the choice matters more than most buyers realize. There are many ways to hold an interest in land — Fee (Simple, Absolute, or Determinable), Life Estate, or Future Interest among them — without even getting into the Rule Against Perpetuities, California’s limit on how long a future interest can remain unvested. This article focuses on the more common, practical question: how title to real property is held once you already know who the owners are.
That raises the obvious question: if churches don’t have to apply, why does this topic come up so often? The short answer is that automatic exemption and formal recognition are two different things, and many churches find the formal route worth pursuing Under California Civil Code §682, title to real property in California held by more than one party generally falls into one of a few recognized forms. Title may also be held by a single individual in sole ownership.
Joint Tenancy: One Way of Holding Title to Real Property
Equal, undivided shares in the whole of the property, with right of survivorship, requiring unity of time, title, interest, and possession. All ownership shares must be acquired at the same time and in equal shares.
The primary benefit of holding title to real property as joint tenants is that every owner holds an equal interest with the right of survivorship. Any owner can also sell or place a lien on their own interest — though doing so terminates the joint tenancy as to that share, converting it into a tenancy in common between the remaining owners.
The right of survivorship is automatic by operation of law. Upon the death of one joint tenant, their interest transfers immediately and automatically to the surviving owner(s), avoiding probate but often creating confusion. A joint tenant may attempt to leave their share to a third party in a will, but that transfer never actually occurs — the right of survivorship vests immediately at death, and by that point the deceased no longer has an interest left to give away.
Tenants in Common
Title held by two or more people in equal or unequal shares, as separate undivided interests, with no right of survivorship.
Each owner may transfer, lien, or otherwise encumber their own share without affecting the others — though most lenders and buyers have little interest in purchasing a fractional interest in real property. An owner may also will or otherwise gift their share to anyone they choose, since there’s no automatic survivorship right diverting it elsewhere.
Community Property
California is a community property state, and this is one of the most common ways married couples end up holding title to real property without ever making an explicit choice: all property, real or personal, regardless of where it’s located, acquired during marriage while the couple lives in California is presumed to belong to both spouses equally.
Community property shares some features with joint tenancy — both spouses hold an equal, undivided interest — and some features with tenancy in common, since either spouse may will their interest at death. However, both spouses must consent to sell or encumber the property. Absent a will or other bequest, a deceased spouse’s interest passes automatically to the surviving spouse.
Trust, Corporation, LLC, or Partnership
Holding title to real property isn’t limited to individuals. Title can also be held by a trustee in trust, where the trustee holds title according to the trust’s terms for the benefit of the trustor or beneficiary. Title may likewise be held by a legal entity such as a corporation or an LLC (Limited Liability Company).
Each method of holding title to real property comes with its own tradeoffs around control, transferability, tax treatment, and what happens at death or dissolution. Choosing the right approach to holding title to real property up front avoids most of the disputes that surface later. When in doubt, consult with an attorney before deciding how to take title.
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Disclaimer: Every situation is different and particular facts may vary thereby changing or altering a possible course of action or conclusion. The information contained herein is intended to be general in nature as laws vary between federal, state, counties, and municipalities and therefore may not apply to any given matter. This information is not intended to be legal advice or relied upon as a legal opinion, course of action, accounting, tax or other professional service. You should consult the proper legal or professional advisor knowledgeable in the area that pertains to your particular situation.
