Can One Co-Owner Take Out a Loan on a Jointly Owned Property?

Co-ownership disagreements can easily boil over when multiple parties own real property, especially when one party has taken out loans without the consent of their co-owner(s). The remaining co-owners want to be sure that their equity in the property is still available to them even if their co-owner has encumbrances on the property, including mortgages, tax liens, child support liens, and many more. If you are looking to end your co-ownership relationship but are unable to remove yourself from a mortgage on jointly owned property, forcing the sale of property through what is known as a partition action may be a suitable remedy.

Encumbrances Without Consent of All Parties

California courts have made it clear that: “Each cotenant can sell or encumber his or her interest in the common property without the knowledge, approval, or consent of the other cotenants.” Zieve, Brodnax & Steele, LLP v. Dhindsa (2020) 49 Cal.App.5th 27, 35.

Is the Entire Property Encumbered When Only One Co-Owner Signs a Trust Deed?

Indeed: “Any deed of trust … given by only one cotenant affects only his or her interest in the property.” Zieve, Brodnax & Steele, LLP v. Dhindsa (2020) 49 Cal.App.5th 27, 35–36.

“When a cotenant has separately encumbered his interest in the property … it attaches only to such cotenant’s interest.” Caito v. United California Bank (1978) 20 Cal.3d 694, 701.

According to Miller & Starr, a leading secondary source in real estate law: “A cotenant can only transfer or encumber his or her undivided interest. One cotenant cannot sell or encumber the whole…property…Without special authority from the other cotenants, one cotenant cannot encumber the entire estate, and any deed of trust, mortgage, or other encumbrance given by only one cotenant affects only his or her interest in the property.” Miller & Starr, Right to sell or encumber interest, 4 Cal. Real Est. (4th ed.) § 11:11.

What Happens if Payments Are Not Made?

“When a deed of trust is a lien on the estate of only one cotenant, the beneficiary can foreclose the lien against that interest. The foreclosure sale purchaser becomes a tenant in common with the other cotenants[ ] and may commence a partition action.” Zieve, Brodnax & Steele, LLP v. Dhindsa (2020) 49 Cal.App.5th 27, 36 (quoting Miller & Starr, Rights of creditors, 4 Cal. Real Est. (4th ed.) § 11:13).

Can a Co-Owner Refinance the Mortgage Without the Consent of All Co-Owners?

Many co-owners ask a more typical question: Will a normal mortgage lender give a new mortgage (i.e., a refinance) against the jointly owned property without the consent of all co-owners? No. Normal, institutional lenders (Wells Fargo, Bank of America, etc.) will want the signatures of all co-owners before they lend money. This is because, if the payments are not made, the lender wants to foreclose on their mortgage (deed of trust) to own the entire property. However, if you are wondering about this question, chances are that the co-ownership relationship has already deteriorated such that there is mistrust between the co-owners. Usually, this means it is time to end the co-ownership relationship so that the parties can move on to healthier relationships.

Talkov Law’s Experienced Partition Attorneys Are Here to Help

If you are looking to get out of a co-ownership relationship in which your co-owner has encumbered his or her interest, a partition action may be the answer to your co-ownership woes. An experienced partition attorney can help you unlock the equity in your home by performing an accounting that takes all co-owners’ encumbrances into account, including those against only one co-owner. With years of experience handling hundreds of partition actions throughout California, Talkov Law is ready to help you end your co-ownership dispute for no fee until your case is settled or you win your case. Contact Talkov Law today to schedule your free, no obligation consultation by calling us at (844) 4-TALKOV (825568)emailing us, or filling out a contact form online.

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The partition attorneys at Talkov Law end co-ownership disputes by representing co-owners in real estate partition actions throughout the State of California.

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