The California State Board of Equalization (BOE) recently wrote a letter summarizing how a real estate owner can rescind a recorded deed that gave rise to a reassessable change in ownership. When real estate deeds are recorded, unless at least one of several exemptions from reassessment applies, the property is reassessed for tax purposes and the current owner’s taxes will be increased. But what if a deed was recorded by mistake and you want to undo the mistake so as to avoid the assessor’s tax reassessment? What can be done? If you qualify, you simply rescind the deed.
When you record a grant, quitclaim deed or other written instrument that conveys or transfers title to real property, it is done on a voluntary basis. A voluntary transfer of title to property is an executed contract which is subject to all the rules and laws dealing with contracts in general. As a result, since deeds are considered executed contracts that are subject to the rules applicable to contracts, they are subject to the California Civil Code. The Civil Code spells out the basis for which a contract can be rescinded.
California Civil Code Section 1688 provides that a contract is extinguished by its rescission. A contract may be rescinded either mutually if all the parties consent and if all parties are restored to their original position before the execution of the contract, or unilaterally under certain circumstances such as fraud, mistake or duress. Upon rescission, “the contract becomes a nullity; it and each of its terms and provisions cease to be subsisting or enforceable against the other party.” Section 1691 explicitly requires the restoration of the parties to the status quo for unilateral rescission. Although the Civil Code contains no similar explicit requirement for mutual rescission, case law is supportive of a requirement to return the parties to the status quo for mutual rescission. Also, since a mutual rescission has the effect of nullifying the contract, it follows that the parties to an executed contract should return each other to the position they were in prior to the execution of that contract.