Home Purchases: Just Because Someone Is on Title Does Not Always Mean They Are the Owner
By S. Craig Cox, Partner and Hollister Branch Manager
When Another Individual Is Added to the Loan and Title
While risky (and sometimes illegal or prohibited by loan terms), it is fairly common in California for one party to be placed on the title and mortgage to a property solely to help another person, the intended buyer, qualify to purchase the property. This scenario may arise when the intended buyer has cash for a downpayment and pays all future expenses for the property but does not have the credit necessary to qualify for a mortgage as a result of a recent bankruptcy, foreclosure, or simply another purchase too close in time.
When an Individual on the Loan and Title Claims Ownership
Unfortunately, the person placed on title may later claim they were the intended owner, despite paying little to nothing for the property. Complicating matters, these types of agreements are often not documented in writing, so the parties are left fighting over oral agreements and evidence of payments made. Purchasing a property in this manner is not advisable because it often leads to expensive legal disputes down the line, but it happens, and our office has successfully assisted clients in this very scenario. Just because the true owner was not placed on title does not mean that all hope is lost.
Are Individuals on Title Entitled to Equity in the Property?
It is important to understand that just because your name is placed on the title and mortgage does not mean that you are necessarily entitled to any equity in the property. When one party pays for the purchase of a property while title is placed in the name of another, California courts have determined there is a “resulting trust” for the benefit of the true owner. A resulting trust “arises from a transfer of property under circumstances showing that the transferee was not intended to take the beneficial interest…. It has been termed an “intention-enforcing” trust, to distinguish it from the other type of implied trust, the constructive or ‘fraud-rectifying’ trust. The resulting trust carries out the inferred intent of the parties…” (Martin v. Kehl (1983) 145 Cal.App.3d 228, 238.) “Ordinarily a resulting trust arises in favor of the payor of the purchase price of the property where the purchase price, or a part thereof, is paid by one person and the title is taken in the name of another.” (Id.) “The trust arises because it is the natural presumption in such a case that it was their intention that the ostensible purchaser should acquire and hold the property for the one with whose means it was acquired.” (Id. See also In re Marriage of Ruelas (2017) 154 Cal.App.4th 339 and Stone v. Lobsien (1952) 112 Cal.App.2d 750.)
The courts in California are courts of equity, which means their goal and purpose is do what is right – i.e., enforce the parties’ intentions where possible as long as it is fair.
If you are dealing with an ownership dispute, give our office a call, and we can guide you toward a fair and equitable resolution, whether informally or through litigation if necessary.
