Co-Owners’ Right to Encumber Property in California

Right to Encumber a Jointly Owned Property in California

In a partition action, co-owners have already demonstrated that they disagree on what to do with a property. Tensions may rise when one co-owner voluntarily places an encumbrance on the property, such as a mortgage, or an involuntary encumbrance, such as a child support lien or tax lien, is now attached to the property. The law makes clear that a co-owner’s interest can be encumbered.

Can a Co-owner Encumber the Entire Property?

California courts have established that: “When a cotenant has separately encumbered his interest in the property…it attaches only to such cotenant’s interest.” ^[1]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.” ^[2]Miller & Starr, Right to sell or encumber interest, 4 Cal. Real Est. (4th ed.) § 11:11. “Any deed of trust … given by only one cotenant affects only his or her interest in the property.” ^[3]Zieve, Brodnax & Steele, LLP v. Dhindsa (2020) 49 Cal.App.5th 27, 35–36.

Consent of Other Co-owners to Encumber a Property

Some co-owners believe that all co-owners must agree to a lien on the property. The law says just the opposite. “Each cotenant can sell or encumber his or her interest in the common property without the knowledge, approval, or consent of the other cotenants.” ^[4]Zieve, Brodnax & Steele, LLP v. Dhindsa (2020) 49 Cal.App.5th 27, 35.

The Effect of Encumbrances in a Foreclosure, Trustee’s Sale, or Judgment Lien Execution

Sometimes, a co-owner does not pay their creditors what is owed on the lien. The law is that: “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.” ^[5]Zieve, Brodnax & Steele, LLP v. Dhindsa (2020) 49 Cal.App.5th 27, 36. “[The conveyance or encumbrance] does not, by itself, cause a partition of the property, and the whole property remains subject to partition as if no conveyance or encumbrance had been made.” ^[6]Miller & Starr, Right to sell or encumber interest, 4 Cal. Real Est. (4th ed.) § 11:11. It is only once the partition has been initiated that the court will “determine the status and priority of all liens upon the property.” ^[7]Code of Civil Procedure 872.630. Any co-owner has the absolute right to partition, even if an encumbrance exists on their interest or their co-owner’s interest. Accordingly, the foreclosing lender becomes a co-owner of the property.