DEAR BENNY: I am considering buying a condo in San Francisco. It looks like most condos advertise taking title as TIC (tenants in common). Can you please explain a little more about TIC? What are the disadvantages and advantages? –Eton
DEAR ETON: Because this is a syndicated column that appears throughout the United States, my answer has to be general. You should consult your own attorney to assist you in your decision-making.
Oversimplified, there are four ways that title can be held for your own home:
- Sole owner: As the name implies, you — and you alone — own the property in your own name.
- Tenants in common: Here, two or more persons own the property. Each owner (called "tenant" for this purpose) owns his or her own share. It can be 50-50, but that’s not mandatory. For example, if you and a partner buy property and you put up more of the down payment (or pay more of the monthly expenses) you can own if in a different percentage — say 60-40, or even 95-5). You can do with your share as you want; if you can find someone to buy your partial interest, you have that right.
- What is most important is that should you die, your interest will be distributed under the terms of your will (and everyone should have a will). If you do not have a will, your state law (called the law of intestacy) will dictate to whom your share will go. In most states, your estate will have to be probated.
- Joint tenants with right of survivorship: Here, you and a partner own the property equally. On your death, your interest will automatically pass to your partner, without the necessity of probate. It is my understanding that while most states require equal ownership, a couple of states allow uneven percentage ownership.
- Tenants by the entirety: This arrangement (called "T/E") is reserved for husbands and wives. Basically, it is treated the same as joint tenants. The main difference is that if you own property as a joint tenant and there is a court judgment against only you, the property can be sold to satisfy that judgment. The other joint owner will receive half of the sales proceeds, but the judgment creditor will be entitled to collect from your share of the proceeds. Furthermore, a joint tenancy can be broken unilaterally; either owner can convert that into a tenant-in-common arrangement. With T/E, however, only divorce (or written agreement between husband and wife) can sever that legal title.
I don’t know why the condominium developers are advertising tenant-in-common arrangements. Developers are interested in selling their property; they could care less how you take title. That’s a decision only you have to make.
DEAR BENNY: Did you know that holding title to multiple properties in LLCs can be expensive, especially in California, where each LLC pays the state an $800 annual fee? –Bruce
DEAR BRUCE: I was unaware that California imposes an $800 yearly fee for each limited liability company (LLC), and that is obviously a steep price to pay.
But, if all of your assets are in your name (or in the name of only one LLC) and you are sued and a judgment is entered against you for more than your insurance coverage (or if the insurance carrier refuses to cover you), you could lose all of those assets.
So, I would think that even paying $800 per LLC is good insurance. While you may lose one of your properties, you won’t lose all of them. You do, however, have to be careful not to commingle funds and keep separate books and records for each LLC. I also recommend that every time you sign a document for an LLC you add the word "member" after your name. This will put the world on notice that you are not acting on your own behalf, but for one of the limited liability companies.
DEAR BENNY: We recently bought a house. We feel a very important item was not disclosed. They will not let us talk to their legal department or provide us with the phone number. What can we do? –Paul
DEAR PAUL: I do not fully understand your question. Did you buy the house from a bank? What legal department is involved?
When you went to settlement (called "escrow" in some states) you received a settlement statement called a HUD-1. That will show the name of the seller. If you are having trouble tracking down the seller, I suggest that you do two things.
First, contact the appropriate consumer protection agency in your state. Often it is part of the state attorney general’s office. Ask them for assistance.
Second, you should retain a local real estate attorney. That lawyer should be able to locate the seller and will also give you advice as to whether it pays to pursue the matter.
I have often found from my experience that it just does not make sense to pursue a seller for nondisclosure. Sometimes, it is cheaper just to "bite the bullet," admit to yourself that you have a problem, and correct the matter on your own.
Obviously, if this is a major item that will cost you a lot of money, you may decide to follow up with demand letters and ultimately a lawsuit.
By the way, if there was a real estate agent involved in the transaction, that agent may also be able to assist you.
DEAR BENNY: I bought a house five years ago and am considering moving to another city where real estate sells for much less. I’m a real beginner at this. If the balance on my home loan is about $148,000, what happens when I sell it? Does the buyer pay off my loan? Or do I pay it with the selling price, or what? –Judy
DEAR JUDY: My role in writing this column is to educate consumers, and I am delighted to respond to your question. When you sell your house, you and your buyer will have a house closing. In some parts of the country it is conducted by an attorney selected by the buyer; in other parts it is done by a title or escrow company.
At the closing, your loan — and many other fees and charges associated with a settlement — will be deducted from your sales proceeds. For example, real estate taxes will be prorated and adjusted. Many states require buyers and sellers to pay a recording fee and a transfer tax to the state (and sometimes the county in which the property is located). In some states, buyers pay for title insurance; in others, the custom is for the seller to pick up that expense.
I suggest that you either consult a real estate agent or a local title attorney (or title company). Either one should be able to provide you with an approximate cost of selling your house.
At settlement (or shortly thereafter) you will receive a check for the net sales proceeds.
You should also consult a financial advisor. If you are married, file a joint income tax return, and have lived and owned your house for two years out of the five years before the sale, you are eligible to exclude up to $500,000 of any profit that you made. (If you are single, or file a separate tax return, the exclusion is only up to $250,000). That means that you do not have to pay any capital gains tax to the IRS for your profit up to the exclusion limit.
Since you are new to the process, you really should get legal assistance as well as consider finding a good real estate agent to help you understand the selling process.
DEAR BENNY: I recently purchased a home and have been flooded with junk mail regarding refinancing and the like. Are these people getting my name and address from my local assessor or recorder? Is there any way to put a stop to this?
If I purchase a property in the future, is there any way to shield my name and contact information from these vultures? –Bay
DEAR BAY: If it’s any consolation, I get the same amount of junk mail — including lots of junk e-mail based on my column. You are correct that when a house is bought, the deed is recorded among the land records in the county where the property is located. This is public information, and anyone can go to the local Web site of the recorder of deeds and get an awful lot of information on you.
In fact, here in the District of Columbia where I practice law, our local recorder tried to get Social Security numbers listed on these legal documents. Hopefully, our local bar and title associations will be able to stop this from happening.
If you take title in the name of a limited liability company (which I don’t recommend if this is your principal residence) or if title is in the name of some kind of trust, you may be able to shield your identity. Have the attorney who prepared the trust document put his or her name and address on all records so that the attorney will start getting the junk mail.
But there’s a danger. If, for example, the attorney will be getting your tax bills, and the attorney forgets to send them to you (or closes his or her law practice), you may not be getting all of the information that you need.
My suggestion: Just get a bigger wastepaper basket and a shredder and put up with it.
I welcome other suggestions from readers.
Benny L. Kass is a practicing attorney in Washington, D.C., and Maryland. No legal relationship is created by this column. Questions for this column can be submitted to benny@inman.com.
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