Updated August 16, 2026
How title is held determines almost everything that follows. Property held in joint tenancy passes to the surviving joint tenants automatically, outside probate. Property held as tenants in common passes through the deceased owner's estate — to their trust if it was properly funded, or through probate if it was not — which means the surviving co-owners suddenly have a new partner they did not choose, possibly several, and possibly a court supervising the process. If a sale is in progress, escrow does not automatically terminate, but it does stall until someone with authority to sign on the deceased owner's behalf is established. The vesting on the deed is the first thing to check, and it is worth checking before anyone dies rather than after.
Joint tenancy with right of survivorship. The interest passes to the surviving joint tenants immediately on death, outside probate, typically documented with an affidavit of death of joint tenant. Clean, fast, and the least disruptive to a pending sale.
Tenancy in common. The undivided interest passes to the deceased owner's heirs or beneficiaries. Nothing is automatic. If the interest was held in a trust, the successor trustee steps in. If it was not, probate is generally required, which takes months and involves the court.
Community property, and community property with right of survivorship. A spousal form with specific California tax advantages — the basis adjustment on the first spouse's death can apply to the entire property rather than half. The survivorship variant also avoids probate.
An entity — LLC or partnership. The entity continues to own the building. What passes is the deceased member's interest in the entity, governed by the operating agreement. Well-drafted agreements address exactly this, frequently with a buy-sell provision. Poorly drafted ones leave the surviving members negotiating with an estate.
The contract survives. Death does not void a purchase agreement. What it changes is who can sign.
Authority has to be re-established. A successor trustee, an executor or administrator, or a surviving joint tenant, depending on the vesting.
Title will require documentation. Death certificate, trust certification or letters from the court, and the appropriate affidavits.
Timelines slip, sometimes badly. A joint tenancy adds days. A probate adds months, and the buyer has to be willing to wait or the deal is renegotiated.
Tell the buyer promptly. They will find out at title. A seller who explains the situation and the path forward keeps the deal together far more often than one who lets it emerge as a delay with no explanation.
The deceased owner's interest generally receives a step-up in basis to fair market value as of the date of death. On a long-held Los Angeles building that can transform the economics of a sale — the heirs may face very little capital gain on that interest, while the surviving original owners still carry their old basis on theirs.
That asymmetry sometimes changes what the parties want to do. An heir with a stepped-up basis is close to indifferent between selling now and later on tax grounds. A surviving original owner with a decades-old basis is not. Naming that difference openly usually produces a better conversation than discovering it midway through a negotiation.
For spouses, California's community property treatment can adjust the basis of the entire property on the first death, which is a considerably larger benefit than the half-interest adjustment available in separate property states. How title is characterized matters enormously, and it is worth confirming with a CPA and an estate attorney rather than assuming from the deed language alone.
Separately, Proposition 19 means a transfer to children generally triggers property tax reassessment on that interest — the income tax basis stepping up and the property tax basis resetting upward happen at the same moment, and they cut in opposite directions.
Check the vesting on the recorded deed. Not what everyone remembers, what the deed says.
Confirm any trust was actually funded. A trust that was drafted but never took title to the building does not avoid probate. This is the single most common estate planning failure on real property.
Read the operating agreement if an entity holds title. Look specifically for what happens on a member's death and whether there is a buy-sell mechanism.
Get a current valuation. Whether for a buy-sell, a date-of-death appraisal, or simply so the family knows what is at stake, the value is the input every one of these decisions needs.
Check how title is held before anything happens, confirm the trust actually holds the building, and read the entity agreement if there is one. Those three steps determine whether a co-owner's death is an administrative delay or a six-month probate that stops a sale. And if it has already happened mid-escrow, tell the buyer immediately with a realistic timeline — buyers accommodate a documented path far more readily than an unexplained pause.
Does escrow automatically cancel if a seller dies?
No. The contract remains in effect, but signing authority has to be re-established through the appropriate estate or trust process before it can close. Whether the buyer waits depends largely on how promptly and clearly the situation is explained.
Can the surviving owners force a sale over the heirs' objection?
It depends on the ownership structure and any governing agreement. Tenants in common each hold partition rights, which is the backstop that usually drives a negotiated outcome. An entity's operating agreement may contain its own mechanism.
Do we need a new appraisal?
A date-of-death valuation is generally advisable to substantiate the stepped-up basis for the inherited interest. It is far easier to obtain contemporaneously than to reconstruct years later, and it is the kind of documentation that gets asked for.
Michael Sterman is Senior Managing Director Investments at Marcus & Millichap.
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