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Real Estate Law

For most individuals, families and business owners, real estate represents a major part of their total overall net worth. Our real estate attorney and lawyer provide litigation experience and professional services that are attune to today’s advanced but ever-changing market. Our real estate practice is focused on providing you with three main benefits: Helping you avoid the legal pitfalls associated with real estate ownership and transactions; maximizing your tax advantages; and ensuring your bottom line profitability on every one of your real estate holdings.

To this end, we offer all of the following services and more:

Preparation and review of lease agreements

Sales and acquisitions agreements

Joint venture agreements

Construction contracts and commercial development

Financing review and analysis

Limited Liability Company (LLC) formation and real estate entity funding

Evictions

Landlord/Tenant Disputes

Title review and analysis

Deed preparation

Property tax reassessment issues and defense

What is the difference between joint tenancy and tenants in common?

Joint Tenancy is a special form of property ownership where two or more persons are equal owners of some property. The key aspect of joint tenancy is that it creates a Right of Survivorship in the property. The right provides that if any one of the joint tenants dies, the remainder of the property is transferred to the survivors. A valid joint tenancy is said to require “four unities”, namely the unity of interest, unity of title, unity of possession, and unity of time. The unity of interest means each joint tenant has an equal ownership of the property. Unity of title requires the interest of each joint tenant arises from the same document. Unity of possession requires that each joint tenant have an equal right to possess the land. Finally, unity of time means that the interests of each joint tenant arise at the same time. A break of any of the unities (such as one joint tenant transferring their interest to another person) will cause the joint tenancy to break and the property will be held instead as a tenancy in common.<br /> A tenancy in common is a form of joint ownership that does not have the same restrictions as a joint tenancy. Tenants in common may have larger or smaller shares than other tenants. Each tenant is free to transfer his or her share without restriction. A tenancy in common also does not create any right of survivorship, which means the other tenants do not have any interest in a deceased tenant’s share; rather, the share will be passed to the deceased tenant’s heirs.

Why should my husband and I hold title to our home as community property?

In California, or any other community property state, if you were married while your home mortgage was paid off using one of the spouse’s salaries, it will be considered community property. However, there are good reasons to hold your home as community property rather than as joint tenants. The biggest advantage is receiving a step-up in basis for 100% of all community property assets at the death of the first spouse, rather than only a step up of the 50% held by the decedent if a joint tenant. By holding the property as community property, each spouse is deemed to own the entirety of the property. Therefore, when a spouse dies the entire property receives a step up in basis. If the property were held as joint tenants, the decedent spouse would only own 50% of the property at death, and therefore would only receive a step-up in basis for that 50%.<br /> Let’s say a couple purchased their home with their spouse for $500,000. After 30 years, the home is now worth $5,000,000. At this time the basis in the house is $500,000. If the house was sold the couple would pay capital gains on $4,500,000. Now let’s say one spouse dies. If the property were held as joint tenants, the deceased spouse would own 50% of the property and that 50% would receive a basis step up. Therefore, the deceased spouse’s interest would have a basis of $2,500,000, and the surviving spouse’s interest would still have a basis of $250,000, giving us a total basis in the property of $2,750,000. If the surviving spouse then sold the property, capital gains tax would be paid on $2,250,000. But, if the property is held as community property, the deceased spouse is a deemed owner of the entire property at death, and the entire property receives a step-up in basis to $5,000,000. If the surviving spouse now sells the property, there are no capital gains taxes paid.

How should I hold title to my rental property?

Rental properties can be an excellent source of passive income. Many people acquire rental properties to supplement their income before and after retirement. However, liability is also very high with rental properties because there are other people living on land owned by you. If something happens on the property and a lawsuit is likely filed. The owner of the property will almost always be named in the lawsuit, whether you had anything to do with the incident or not. The manner in which title is held to these properties is very important. If you are named personally as the owner of the property, all of your personal assets become liable to the lawsuit as soon as you are named in the lawsuit. Your liability can be dramatically reduced, however, with the use of a limited liability company. By holding the rental property in a limited liability company, you may be able to contain the liability exposure to the property itself. The limited liability company would be the entity named in the lawsuit, and only the assets of the limited liability company would be specifically exposed to the lawsuit in most cases.<br /> Limited liability companies are a very flexible form of corporate entity that allows you to manage the assets inside the company while protecting your personal assets from the liability of anything that occurs with the assets inside the company. This allows you to have complete control without risking your home and retirement to a law suit.

What is a 1031 exchange?

A 1031 exchange refers to the Internal Revenue Code Section 1031 (a)(1) which allows a person to avoid recognition of capital gains on the sale of an investment property, if the money from the sale is then used to purchase another “like-kind” investment property. This is basically an exemption that allows investors to not have to realize capital gain now if they are not going to actually receive any cash from the deal. However, the new property will be taken by the investor at the original basis of the old building. The investor is simply delaying the realization of capital gains until the building is sold and the money is not reinvested.

I just inherited my parent’s home. How much are the property taxes going to increase?

Propositions 58 provides that the primary residence plus up to $1,000,000 of assessed value of other real property can be transferred from one parent to child(ren) free of any property tax reassessment. Property passed from parent to child or from children to parents can be excluded from reassessment. The established proposition 13 taxable value is not affected by the transfer. The exclusion is not automatic, however, and a timely filed claim must be filed with the Assessor’s office. The children’s property taxes are calculated on the established Proposition 13 factored value, instead of the current market value when the property is acquired. An important thing to remember is that transfers from a legal entity, such as a limited liability company owned by the parents will not qualify for the exclusion.<br /> Therefore, if you inherited your parent’s home (in California) and it was owned in their names before their passing, the property taxes will be unchanged so long as proper filings are timely made.

For more information about Real Estate Law

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