Our Los Angeles partition and real property attorneys frequently come across situations where one co-tenant desires (or already has) encumbered real property. In other words, we frequently see situations where a co-owner of real property takes out a loan against the property either with or without the consent of their co-owner. The obvious questions most people have when they learn of a cotenant’s encumbrances are:(1) is that allowed; and(2) does it effect the other co-tenants interest? The short answer is (1) yes and (2) no, respectively.
In California the law provides that when a covenant encumbers his/her separate interest in real property, the lien attaches on to that party’s interest in the property and not the interest of the other cotenant. Cato v. United California Bank (1978) 20 Cal. 3d 694, 701. In other words, each co-tenant has the ability to borrow against their own interest in the property and that lien does not effect the other cotenant’s interest.
In our next series of blog posts we will address what happens to these liens in the event of the death of the borrower or in the event of a foreclosure.
We frequently come across both disclosed and undisclosed liens against real property when the cotenancy situation breaks down and one party sues to partition the real property. In partition actions, this usually results in a somewhat complicated interlocutory judgment calling for a distribution from the sale proceeds that accounts for these liens.
For help with your real estate matter and, more specifically your partition matter, contact us today.
By Los Angeles Real Estate Attorney Zachary D. Schorr, Esq.