Legal Question in Real Estate Law in California

Here are some fairly general responses, not necessarily the best advice for this particular situation (about which I have very limited information):

The type of instrument you're referencing is a "quitclaim deed," not a "quick deed." There's no such thing as a quick deed. A quitclaim deed is one of the two kinds of deeds most frequently used to convey real property, the other being the "grant deed." The main difference between the two is that the quitclaim carries no warranties of title, while the grant deed carries a couple of implied warranties as to the grantor's title.

A major obstacle to giving away property, or selling it cheaply, is that it doesn't pay off the existing financing. Almost all home loans contain provisions that, at least technically, require pay-off upon a sale or other transfer of ownership. These are usually called "due-on-sale" clauses and typically allow the lender to declare the loan immediately due and payable in full. Lenders sometimes ignore such clauses if they continue to get paid on time every month, and sometimes they will formally waive the clauses (often upon payment of a fee), such as when ownership changes because of a divorce. Here, it is a factor to consider.

Next obstacle, perhaps, is that when the property changes hands, there will be tax consequences. One of these is that the county can reappraise the property for property-tax purposes. This may not be an issue these days, because many properties have declined to below their assessed values, but it is something to consider. There may also be gift tax or capital-gains tax issues, now or in the future. I suggest the two of you take your numbers to a local tax advisor (a CPA type, not an income-tax filing store type).

As to the transaction mechanics, your sister would prepare, sign before a notary public, then deliver to you the deed. Upon your accepting the deed, you become the new owner. The deed should then be recorded so everyone else in the world is on notice. Recording is done by filing the deed with the county recorder and payment of recording fees and a transfer tax. So, there is nothing you have to sign, but that doesn't mean you have no responsibilities!

Change of ownership of the house will have no immediate effect on the tenants, except they will have a new landlord. Unless the two of you agree otherwise, the tenants would pay the rent to you. However, since your sister would presumably still have the mortgage-payment obligation, I suppose you and she should have an agreement that applies the rent to the payments and other expenses.

Maintenance responsibilities would depend to some degree on the rental agreement with the tenants. Sometimes tenants have responsibilities such as mowing the lawn and repairing the fence, sometimes not. In the long run, you as the owner are ultimately going to be responsible for upkeep, insurance, property taxes, etc., so this is a gift horse you need to look in the mouth.

How close is the property from foreclosure? You need to think about whether the loan is now in default, or may be in the future, and why you would want to be in the chain of title of a property that's going to a foreclosure sale anyway.

Finally, I advise against becoming involved in any deal that might be designed to, or have the effect of, defrauding a current or expected future creditor. Transferring assets by gift within a family is a frequent ploy to try to shelter the assets from creditors, and it's illegal. See the Uniform Fraudulent Transfers Act, California Civil Code section 3439 to 3439.12.

To Mr. Whipple's excellent answer I would add that if there is any equity in the house, it would be a taxable gift to you and your sister will be subject to gift tax (ironically the giver pays the gift tax). I would also add that in my experience in California, the current lender will require a refinance to put the debt on the property in your name. If you don't qualify, they will foreclose. This usually doesn't happen right away, but it will happen eventually. All loans I have ever seen in California are non-assumable. That provision would be pointless unless the lenders intended to enforce the due-on-sale clauses sooner or later after a transfer.

1. It is a quit claim deed, not a quick claim deed, or quick deed. A quit claim deed does not carry any warranties. This means that your sister would not be liable if she did not really own the property. This does not appear to be an issue in your situation.

2. A quit claim to you would be a legally valid conveyance of the property. This, of course, assumes that you would want to accept the deed and it was validly delivered.

3. The conveyance to you would convey the property subject to the existing mortgage, which is most likely a recorded deed of trust. (California has mortgages but rarely uses them.)

4. The conveyance to you would most likely trigger the due on sale clause in the deed of trust. That would cause the entire debt secured by the deed of trust to be accelerated. If you could not pay it, or refinance, you would lose the property in foreclosure.

5. Absent some other written agreement, a deed to you would entitle you to collection of the rents. If there was a recorded assignment of rents, either in the deed of trust, or separately, it would entitle the lender to collect rents upon any default.

6. As the owner of the property you would also take the property subject to any existing lease in favor of the tenants. Determining who would be responsible for maintenance would depend on the nature of repairs and the terms of any written lease.