In Richard N. Benson, as Assessor, v. Marin County Assessment Appeals Board, the Court of Appeal (1st Dist., Div.1) for the State of California held that the conversion of joint tenancy ownership between two brothers into tenancy in common ownership constituted a change in ownership that allowed a reassessment of the property for purposes of the California real property tax. Peter Mikkelsen became the sole owner of real property in 1997 upon the death of his mother. His mother had previously transferred the property into joint tenancy ownership with Peter. Apparently believing that his brother James should have also acquired an interest in the property, Peter transferred title to the property from himself to himself and James as joint tenants, and it was held in that manner for about 10 years.
In 2007 James severed the joint tenancy by executing and recording a deed to himself as a tenant in common. The county assessor determined that this was a change in ownership and reassessed the property. James appealed to the Assessment Appeals Board, which reversed the Assessor. The Assessor then petitioned the Superior Court for a writ of review, which was denied. This led to the subsequent appeal to the Court of Appeal.
The court admitted that the statutes enacted to implement Proposition 13 are somewhat contradictory and conflicting. James argued that the termination of the joint tenancy was not a change in ownership under Section 60 of the California Revenue and Taxation Code (“R & T Code”) because a change in ownership requires the transfer of a present interest in the property and the conversion of a joint tenancy to a tenancy in common does not involve any transfer of a present interest. He also relied on Section 62(a)(2) of the R & T Code which provides that a change in ownership does not include any transfer between co-owners that results in a change in the method of holding title to the real property transferred without changing the proportional interests of the co-owners. On its face, this section supports James’ argument that the conversion from a joint tenancy to a tenancy in common is not a change in ownership.
The Court of Appeal determined, however, that the more specific provisions of Section 65 of the R & T Code were applicable, which deal specifically with the creation and termination of joint tenancies. Section 65(b) provides that the creation of a joint tenancy is not a change in ownership as long as the transferor of the property is one of the joint tenants. This means that when Peter transferred the property from his sole ownership to joint tenancy ownership between himself and his brother, there was no change in ownership. While Peter certainly had transferred a present interest in the property to James, the court reviewed the legislative history of the change in ownership provisions and determined that the legislature made a conscious determination to limit the number of reassessments by providing that the creation of a joint tenancy was not a change in ownership where the prior owner continued his ownership as one of the joint tenants.
Instead of treating the creation of a joint tenancy as a change in ownership, the legislature decided instead to treat the termination of a joint tenancy as a change in ownership. Section 65(c) provides that where an interest in a joint tenancy is terminated, any portion of the property that does not go back to the original owner is reassessed. The court held that under this provision, the 50% of the property that went to James in 2007 when he terminated the joint tenancy was properly reassessed at that time.