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Mortgages as Joint Tenants

by Jayne Thompson, studioD

When two or more people own property as joint tenants, they're signing up to a unique legal interest in land that effectively treats them as a single, unified entity. Joint tenants have the right to use property together -- ideally, they should encumber property together. However, many states permit a single joint tenant to encumber property, such as taking out a mortgage, without the knowledge or consent of the other. The effect of such an act depends on where you live.

Joint Tenancy

Joint tenancy is a form of co-ownership that allows two or more individuals to co-own property. It has certain unique characteristics. Joint tenants must have unity of interest, which means they each hold an equal share in the home. They must also have unity of time, title and possession, which gives each of them the right to occupy, use and take income from the property equally and concurrently. The defining characteristic of a joint tenancy, however, is the right of survivorship. Death eliminates a deceased joint tenant's share in the property, so that the surviving co-owner takes automatic title to the entire property.

Joint Mortgage

A mortgage is the pledge of real estate as security for a loan. It does not itself create the loan: this is done by promissory note, which in layman's term is the borrower's promise to repay the debt. A joint mortgage is any promissory note taken out by more than one borrower, secured by real estate. It requires two or more people to share finances and responsibility for the debt. Typically, joint mortgages are given on a joint and several basis. This means that each co-borrower is 100 percent responsible for repayment of the loan. If one borrower refuses to pay, the lender simply recovers the full amount from the second borrower. The real estate used as collateral for the loan doesn't have to be owned jointly by the borrowers, though it typically is.

Lien Theory

In theory, one joint tenant can take out a mortgage against the joint tenancy property without the consent or even the knowledge of the other joint tenants. Some states allow a borrower to do this without defeating the joint tenancy arrangement, although the lender's lien attaches only to the borrower's interest in the property. An interesting situation then arises when the borrower dies. Death severs a joint tenancy by terminating the decedent's share in the property. By definition, the mortgage lien must end as well, denying the lender the collateral for his loan. The survivor takes the property free of the mortgage debt.

Title Theory

The above scenario has a very different result if the borrower does anything to destroy one of the four joint-tenancy unities of time, title, interest or possession. Some states consider the grant of a mortgage by one joint tenant an effective conveyance of his part share, destroying the unities and severing the joint tenancy. Severing a joint tenancy converts it to a tenancy in common, which means that each owner retains his fractional share in the property but without a right of survivorship, so that each owner may independently dispose of his share. If the borrower dies in a "title theory" jurisdiction, the mortgage survives against the mortgagor's share of the house, and the lender can foreclose or otherwise enforce the mortgage against that share.

About the Author

Jayne Thompson qualified as a solicitor in 1996. She holds a first degree in law and business from the University of Birmingham and a Master of laws from the University of East London.Thompson shamefully admits to using her family as fodder for the lifestyle and parenting articles she also writes, which have appeared most recently in "The Green Parent" magazine.

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