ACQUISITION AND TRANSFER OF REAL ESTATE

ACQUISITION AND TRANSFER OF REAL ESTATE

Usually, acquisition of property by one party entails a transfer from another party, and so we consider
acquisition and transfer together.

The basic distinction between real and personal property is not taken into account in the broad statutory
statement of how property is acquired. In the following discussion, however, the methods by which real
property is acquired or transferred are emphasized.

The Civil Code states that there are nine ways to acquire property: will, succession, accession, occupancy, and
by transfer as follows:

1. By will:

a. Formal or witnessed will.

b. Holographic will.

c. California Statutory will.

d. California Statutory will with Trust.

2. By succession:

a. Of separate property.

b. Of community property.

3. By accession:

a. Through actiocren (alluvion or reliction).

b. Through avulsion.

c. Through addition of fixtures.

d. Through improvements made in error.

4. By occupancy:

a. Abandonment.

b. Prescription.

c. Adverse possession.

5. By transfer:

a. Private grant.

b. Public grant.

c. Gift (to private person or to public, by dedication).

d. Alienation by operation of law or court action (partition, quiet title, foreclosure, declaratory relief).

6. By marriage.

7. By escheat.

8. By eminent domain.

9. By equitable estoppel.

Will

Property accumulated during life may be disposed of at death to designated beneficiaries. The instrument
achieves this disposition of property is called a will. The execution of a will during life has no effect on
property interests, as the instrument only becomes effective at death. This is the distinguishing feature between
wills and other instruments creating property interests such as deeds and contracts. The latter two instruments
create some present interest and are not dependent upon death to be effective.

Types of wills. The types of wills permitted by law are the witnessed will, holographic will, statutory will and
statutory will with trust. The first is a formal written instrument signed by the maker, and declared to be the
maker’s will in the presence of at least two witnesses who, at the maker’s request and in the maker’s presence,
also sign the will as witnesses. This document should be prepared by an attorney. A holographic will is one
entirely written, dated and signed in the testator’s own handwriting. No other formalities are required. Statutory
wills are prepared in accordance with a format authorized by statute.

When a person dies, title to his or her real property passes directly to the beneficiaries named in the will, or to
the heirs if the decedent did not leave a will. Title, however, is not marketable or insurable because the law
provides that on death all property is subject to the temporary possession of the executor or executrix,
administrator or administratrix, with a few exceptions. Legal title is also subject to the control of the probate
court for purposes of determining and liquidating creditors’ claims and for establishing the identity of the heirs,

devisees, and legatees of the estate.

Probate

Probate procedure commences with a petition for probate of a will or for letters of administration if there is no
will. A hearing is held and a representative is appointed to handle the estate. This person is referred to as an
executor or executrix if there is a will or an administrator or administratrix if there is no will, or if no personal
representative is named in the will.

Notice to creditors is then published, giving all creditors four months within which to file their claims. An
inventory and appraisement of the estate listing all the assets is filed with the county clerk. During
administration of the estate, the representative may sell estate property subject to court approval only.

After the time for filing and “creditors” claims have expired, the representative files an accounting of all
receipts and disbursements and requests court approval of the same. Finally, the representative petitions the
court to approve distribution of the remaining assets to the proper heirs and devisees. Small estates may be
exempt from probate administration or subject to special summary procedures.

Succession

If a person dies without leaving a will, the law provides for disposition of decedent’s property. This is called
intestate succession. A large number of special rules are included in the law depending upon the character of the
property and the relationship of the next of kin. In the simplest cases, separate property is divided equally
between a surviving spouse and one child, or split one-third to the surviving spouse and one-third to each of two
children, etc. One-half of the community property belongs to the surviving spouse and the other half is subject
to disposition by the decedent’s will. If there is no will, the decedent’s half of the community property
remaining after payment of his or her liabilities goes to the surviving spouse.

Accession

By accession, an owner’s title to improvements or additions to his or her property may be extended as a result
of either man-made or natural causes. For example, a fixture may be annexed to a building by a tenant, or a
neighbor may affix a wall or a building in such a way to the landowner’s property without agreement to remove
the improvement so as to extend the landowner’s title to the improvement.

By natural causes, through accretion, the owner of a riparian property (i.e., located along a moving body of
water such as a river or stream) or littoral property (i.e., located beside a pond, lake or ocean) may acquire title
to additional land by the gradual accumulation of land deposited on the owner’s property from the shifting of
the river or the ocean’s action. The land increase by this build-up of sediment (or alluvium) is called alluvion.
The gradual recession of water, leaving permanently dry land is accession caused by reliction. Rapid washing
away of land is called avulsion.

Addition of fixtures. Acquisition of title by addition of fixtures occurs when a person affixes something to the
land of another without permission and/or an agreement permitting removal of it. The thing so affixed belongs
to the owner of the land, unless the owner requires the former tenant to remove it.

Improvements made in error. At one time there was no compensation for the innocent person who mistakenly
improved someone else’s real property (e.g., built a house on another’s lot). However, the Legislature changed
this in 1953 by amending the Civil Code Section 1013.5. The change permits a person who affixes
improvements to the land of another, in good faith and erroneously believing - because of a mistake of fact or
law – that he or she has a right to do so, to remove the improvements upon payment of damages to the owner of
the land and any other persons having an interest therein who acquired the interest in reliance on the
improvements.

Abandonment. Abandonment is the voluntary surrender of possession of real property or a leasehold with the
intention of terminating one’s possession or interest and without assigning the interest to another. If the owner
of a leasehold interest (i.e., the lessee) abandons the property, the landlord reacquires possession and full control
of the premises. Mere non-use is not abandonment.

Prescription. An easement created by prescription is analogous to adverse possession (discussed below).
Although only the right to use someone else’s land results in a property interest that is thus acquired.

Adverse possession. The actual physical possession of property has always been accorded considerable weight
in connection with a variety of rights and obligations. Immediately upon occupying property, an adverse
possessor acquires a title to the property good against all the rest of the world except the state and the true
owner. Such occupation may ripen into legal title by adverse possession if the possession is:

1. by actual occupation;

2. open and notorious;

3. hostile to the true owner’s title;

4. under claim of right or color of title;

5. continuous and uninterrupted for a period of five years; and

6. accompanied by payment of all real property taxes for a period of five years.

Since title by adverse possession cannot be traced from the county recorder’s office, it is neither marketable nor
insurable until perfected by court decree.

Title by adverse possession usually cannot be acquired against a public body.

Transfer

Property is acquired by transfer when, by an act of the owner or of law, title to property is conveyed from one
person to another. It is the variations of transfer which are of primary concern to real estate brokers.

Private grant. Conveyancing, for consideration, of title to real property by private grant is very important to a
real estate broker and is discussed in Chapter 7.

Gift. An owner of property may voluntarily transfer property to another person without demanding or receiving
consideration. If the gift is real property, it would normally be conveyed by a deed.

Public dedication. Real property intended for public use can be acquired by a governmental body for such use
in any one of three ways: common law dedication, statutory dedication, and deed.

Common law dedication requires that the landowner’s conduct evidences an intent to devote the land to some
public use, such as by executing a deed describing a boundary as being a “street.” To be effective, the public
must accept this dedication by local ordinance or by public use.

The most common example of statutory dedication takes place under the Subdivision Map Act when a
landowner records a map on which certain areas are expressly dedicated to the public for streets and parks.
Dedication by deed is generally used in specific situations not involving subdivisions created under the
Subdivision Map Act. Usually, only an easement is transferred. However, many local governments now require
deeds so that fee title, rather than an easement, is acquired. This method avoids title problems arising upon
abandonment.

Alienation by court action. There are a variety of situations in which courts establish legal title regardless of
the desires of the record owners.

Any person may sue another who claims an adverse interest in real property. This type of proceeding is called a
quiet-title action and is the usual way of clearing tax titles, titles based upon adverse possession, and the title of
a seller under a forfeited recorded contract of sale.

A co-owner of property may sue the other co-owners, requesting a severance of the respective interests. If the
property cannot practically be divided physically, as is usually the case, the court may order a sale, transfer title
to the buyer, and divide the proceeds among the former owners. This proceeding is called a partition action.

A person holding a lien based upon contractual delinquency may ask that the court order sale of the property,
transfer of title to the purchaser, and application of the sales proceeds to the unpaid balance due under the
contract. This is called a foreclosure action. Mortgage and mechanic’s lien foreclosures are examples.

A person may, in cases of actual controversy, bring an action to determine his or her rights and obligations
under any written instrument. A judicial declaration of rights in advance of an actual tortious incident enables

the parties to shape their conduct so as to avoid a breach. This declaratory relief action is often used to construe
deeds, restrictions or homesteads, or to determine rights under an oral contract.

Execution sale. A plaintiff in an action who obtains a money judgment against a defendant can take appropriate
steps to get a writ of execution. This court order directs the sheriff (or marshal or constable) to satisfy the
judgment out of property of the debtor. Real property belonging to the debtor, and not exempt from execution,
is seized by the officer and sold at public auction.

The buyer receives a certificate of sale and, if no redemption is made within the time allowed by statute (usually
12 months), the officer executes and delivers a deed to the buyer.

Forfeiture. An owner may impose a condition subsequent in a deed. If the condition is breached, the grantor or
grantor’s successor has the power to terminate the estate and reacquire title. Similarly, the owner may impose a
special limitation in a deed. If the stated event occurs or the prescribed status fails to endure, the estate
automatically terminates and the grantor or his or her successor reacquires title. In both cases, property is
acquired by forfeiture with no need for consideration.

Marriage. Under California law, marriage does not effect a transfer of title to property. However, subsequent
earnings and acquisitions of husband and wife, or either, during marriage, when not acquired as separate
property, are community property. Each spouse has a present, existing and equal interest in such property.

Escheat. Escheat is the legal process by which title to property vests in the state, usually for lack of heirs or
want of legal ownership. Since a presumption exists that some heirs capable of taking title exist in every case,
the process of escheat is not automatic. Escheat proceedings can be based on an action initiated by the Attorney
General or on a decree of distribution by a probate court.

Eminent domain. By eminent domain, a governmental entity takes private property for public use, paying
compensation based on fair market value.

Equitable estoppel. Equity and good conscience sometimes require that title to real property be transferred if
justice is to be done. The former owner is barred or estopped from denying the title of the innocent claimant.

For example, if an owner permits a friend to appear to the world as the owner of certain property, and an
innocent third party buys the land from that apparent owner, the true owner is barred by the doctrine of
equitable estoppel from claiming ownership.

Similarly, if a person has no title, a defective title, or an estate smaller than the one purported to be conveyed,
but later acquires full title or estate, or perfects the title, the grantee (or grantee’s successor) gets the after-
acquired title by way of estoppel.