Adverse Possession

Rarely in life can you take someone else's property without legal consequence. Adverse possession is an exception to this rule.

While recently listening to the radio in the Bay Area, a local news station mentioned the story of a West Oakland man attempting this. This individual was attempting to gain legal ownership of an ostenisbly abandoned home in West Oakland through adverse possession. The article was misleading in its description of adverse possession as it said:

"Adverse possession is an old law, with roots in California dating back to the Gold Rush, where someone can obtain title to a property without paying for it."

This is a misleading statement. There is no such thing as a free lunch in life.

As described below, the requirements of adverse possession require monetary expense on behalf of the adverse possessor, namely payment of property taxes. If the individual wishes to acquire title to this West Oakland home, they will only do so by paying the property taxes for it for 5 years. Hence, it is a stretch to assert that the individual can obtain title without paying for it.     

The following five elements of adverse possession are:

"(1) Possession must be by actual occupation under such circumstances as to constitute reasonable notice to the owner. 
(2) It must be hostile to the owner's title. 
(3) The holder must claim the property as his own, under either color of title or claim of right. 
(4) Possession must be continuous and uninterrupted for five years.
(5) The holder must pay all the taxes levied and assessed upon the property during the period."

Dimmick v. Dimmick (1962) 58 C2d 417.

In context of wills and trusts, adverse possession can possibly be an issue if real estate is involved.

For instance, assume Danny Decedent owned a farm in Alturas, CA, a remote region in northeast California. Danny was estranged from his entire family who lived mainly in San Francisco. Danny passed away in a tragic hot air balloon accident in 2003. Danny died intestate and did not write a trust. 

Danny's neighbor, Sam Squatter, who was aware of adverse possession, began to occupy the farm immediately thereafter in 2003. Sam knew there was no mortgage on the property, after reviewing real property records, so he thought it was worth the gamble. Whereas if the farm was mortgaged, the bank could possibly accelerate the loan upon Danny's death. Yet since there was no mortgage and loan acceleration was not an issue, Sam thought it was worth a shot. Sam completed the steps necessary to assert an adverse possession claim and then instituted a quiet title action. 

Danny's heirs eventually realized that Danny passed away after doing a Google search. When they realized that Danny passed away and owned real estate, they rushed to claim his estate through intestate succession. However, at that point, it was too late as Sam's quiet title action had concluded and he was awarded ownership of the property.  

If you have any questions please call my office, (408)866-8382 for a complimentary consultation or email me, s.miri@mirilaw.com.

Proposed recording fee increase to support affordable housing

A bill is currently being debated in the California Senate that would significantly increase the cost to record a real estate document.

Basically any document related to real estate must be recorded with the applicable county recorder's office. For example, a deed of trust involving a home in Gilroy would need to be recorded with the Santa Clara County Recorder's Office. Since thousands of documents are recorded each day in California, California is a large state geographically and very populated, the revenue that can be generated by a recording fee increase is immense. In particular, analysis by the California Senate Transportation and Housing Committee stated that between $300M and $750M could be generated each year if the bill passes. The range is due to the fact that in some years more documents are recorded than in others. 

SB-391 (Saulnier) would add a $75 fee to every recordable real estate instrument. These funds would be allocated to principally support affordable housing programs for modest income individuals. The fee would apply to the following instruments: deed, grant deed, trustee’s deed, deed of trust, reconveyance, quit claim deed, fictitious deed of trust, assignment of deed of trust, request for notice of default, abstract of judgment, subordination agreement, declaration of homestead, abandonment of homestead, notice of default, release or discharge, easement, notice of trustee sale, notice of completion, UCC financing statement, mechanic’s lien, maps, and covenants, conditions, and restriction.

The typical cost to record a 1-page document is between $10-25. The reason for the variance is that each county sets its own recording fee. Santa Clara County charges $25 for the first page to record a document whereas Modoc County charges $10. Yes Modoc County is a California county. This bill would significantly increase the cost to record a document. For example, if SB-391 passes, to record a 1-page affidavit of death of a joint tenant in Santa Clara County would cost $100 instead of $25.  

Still, the bill does exempt the $75 fee from documents where the documentary transfer tax is in effect. For example, if a person purchases a home, the $75 fee would not apply.   

The bill's author previously attempted to pass a similar bill in 2012 but fell 2 votes shy on the Senate floor. Since the bill amounts to a tax increase, at least a 2/3 vote is required in both chambers of the California legislature. 

To be clear, this is just proposed bill. It is not California law unless it passes both chambers of the California legislature, Senate and Assembly, and signed by Gov. Brown. 

I express no approval or disapproval of the proposed bill whatsoever. This a legal blog, not a political blog.

If you have any questions please call my office, (408)866-8382 for a complimentary consultation or email me, s.miri@mirilaw.com.

Trust Accounting Exceptions

A trustee is normally required to render an annual accounting to a beneficiary subject to the following exceptions.

Accounting Waived by Trust Instrument

The trust may waive the right to an accounting per Prob C §16064(a). However, despite an accounting waiver clause in the trust, such can still be required "upon a showing that it is reasonably likely that a material breach of the trust has occurred." 

For example, Bobby Beneficiary receives a copy of his Aunt Gertrude's trust following her death. The trust specifically waives the right to an annual accounting. Bobby is aware that Aunt Gertrude's trust owns a rental home that is currently occupied. Bobby passes by the rental property one day to discover a rotting roof, cracked driveway and chipped paint. Bobby calls the trustee, Turner, who explains to Bobby that the house is in perfect condition and there is no need to worry because the rent checks show up timely each month for the correct amount. Bobby implores Turner to inspect the property given its state but Turner declines given that the house is cash-flow positive. Undeterred by Turner's indifference, Bobby asks for an accounting because Bobby is concerned that the structural repairs are substantial and Turner does not have adequate trust assets to cover these costs.

Beneficiary Waives Right to Accounting

Many legal rights in life can be waived. For example, you may waive your Miranda rights, i.e. the right to keep quiet or speak to an attorney if subject to custodial interrogration by law enforcement. Similarly, a beneficiary may waive their right to waive an accounting.

All that suffices is a simple written statement that the beneficiary waives the right to an accounting. However, this waiver is practically illusory. The waiver can be rescinded on a whim. Prob C §16064(b) states "a waiver of rights under this subdivision may be withdrawn in writing at any time as to accounts for transactions occurring after the date of the written withdrawal."
   
In light of the inherent flimsy nature of an accounting waiver, requesting one from a beneficiary is often of little value.

The Beneficiary is the Trustee

When a person writes a trust, e.g. a married couple, they are often the settlor, trustee and beneficiary initially. In such a case, no accounting need be given. Prob C §16069. Conceptually this is quite logical because a person does not have to tell the right hand what the left hand is doing. 

A question I have seen on a few occasions is where a child is concerned about a parent's spending habits. The child is the beneficiary of the trust following the parent's death and wants to ensure there is something left when they inherit. Since the parent is trustee and beneficiary, the child is not entitled to one. However, there is nothing preventing the parent from providing an accounting. Although the accounting would not be compelled by law but rather kindness.  

If you have any questions please call my office, (408)866-8382 for a complimentary consultation or email me, s.miri@mirilaw.com.  

Out-of-state will in California

Many people migrate to California each year. The fact that thousands of people come to the Golden State means that their estate planning instruments also follow them to California. The validity of out-of-state wills is subject to Prob C § 6113. 

It reads as follows:   

"A written will is validly executed if its execution complies with any of the following:  

           

(a) The will is executed in compliance with Section 6110 or 6111 or Chapter 6 (commencing with Section 6200) (California statutory will) or Chapter 11 (commencing with Section 6380) (Uniform International Wills Act).
(b) The execution of the will complies with the law at the time of execution of the place where the will is executed.

(c) The execution of the will complies with the law of the place where at the time of execution or at the time of death the testator is domiciled, has a place of abode, or is a national."

Clearly California has a very broad rule for recognizing the validity of an out-of-state will. For instance, Thomas Walcott was a resident of Brookings, Oregon. Thomas worked for the CA Dept. of Corrections at Pelican Bay State Prison, a short car ride away from his home. Since Thomas did not want to have to pay sales tax or pump his own gas, he lived in Oregon instead of California.

In light of Thomas's very risky occupation, Pelican Bay houses the most violent inmates of California's prison population, he decided to write a will. Since Thomas was not an expert in probate law, Thomas hired an attorney he found on Yelp. The Oregon attorney crafted the will in conformity with Oregon law. The will named his long-time neighbor Nelly Nedson the sole beneficiary of Thomas' estate. Years later, Thomas retired and moved to Thousand Oaks, CA to be closer to his relative. 

When Thomas eventually passed away, his family located Thomas' will. Upon seeing that the will was written in Oregon, his relatives initally became hopeful because they erroneously thought that the will was invalid and that they would inherit Thomas' estate through intestate succession. However, when they took the will a California attorney, the attorney informed them of Prob C § 6113 and said the will might nonetheless be valid. 

The attorney then found the Oregon attorney who helped draft the will and the Oregon attorney provided a declaration attesting to the will's conformity with Oregon law. The California attorney then petitioned for probate with Thomas's Oregon will in Ventura County Superior Court. Eventually, Nelly was contacted and he inherited Thomas' estate at probate's conclusion. 

If you have any questions please call my office, (408)866-8382 for a complimentary consultation or email me, s.miri@mirilaw.com. 

Property ownership

When a person inherits a piece of property, a question that naturally arises is "when does that person's interest in the property vest?" Or in other words, "when did that person become the property's owner?"

This is an important legal question because ownership gives the owner a bundle of legal rights. For example, ownership gives a property owner the ability to occupy, modify, improve, buy, sell, lease and exclude others from such property. 

The California Probate Code says this on the following subject:

"Subject to Section 7001, title to a decedent’s property passes on the decedent’s death to the person to whom it is devised in the decedent’s last will or, in the absence of such a devise, to the decedent’s heirs as prescribed in the laws governing intestate succession." Prob C § 7000.

You might then wonder, what does Prob C § 7001 entail? It reads as follows:

"The decedent’s property is subject to administration under this code, except as otherwise provided by law, and is subject to the rights of beneficiaries, creditors, and other persons as provided by law. Prob C § 7001." 

A common scenario where property ownership is important is when a relative has been staying with the decedent at their home. The following illustration encapsulates a scenario I have heard numerous times over the years.

Randy is a mooch and asks his Aunt Bee if he can stay with her at her country estate in Portola Valley. Aunt Bee is a widow without any chidren and longs for company at her huge home and pities Randy so she decides to take her nephew in. Aunt Bee then writes a will which bequeaths the entire home to her nephew Rufus, a modest man who lives with a spendthrift wife and sells women's shoes at the local mall. Rufus is Randy's brother. Aunt Bee does not believe that Randy should inherit anything because he is a scrounger and Rufus is a tireless worker. One day Aunt Bee passes away in a horrible canoe accident. Rufus retrieves the will from Aunt Bee's safe deposit box and reads that the country estate was bequeathed to him. Rufus retains counsel and his attorney informs him that he technically became owner of the home the moment Aunt Bee died, citing Prob C § 7000.

Rufus believes that Randy exploited Aunt Bee's kindness and demands that Randy leave the home immediately. Randy objects and says that he has squatter's rights and moreover, Rufus must complete probate before title will transfer to him. Rufus then asks his attorney to speak to Randy. His attorney informs Randy that title passed to Rufus on Aunt Bee's death and thereby he was he owner of the property and could make tenancy determinations. Consequently, Rufus was of the belief that Randy's tenancy was over and asked him to leave or face eviction. The attorney also explained that squatter's rights are the stuff of legal fiction. Randy then left the country estate in hopes of finding another sympathetic relative so he could freeload at their home.       

If you have any questions please call my office, (408)866-8382 for a complimentary consultation or email me, s.miri@mirilaw.com.