Can a Joint Owner Mortgage a Property Without Consent of the Other Owner?

You may need permission to mortgage your share of joint tenancy property.

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Joint ownership is legally known as joint tenancy. You and your other joint tenants all have the right to enjoy the property, but drastic actions that transfer ownership rights, such as mortgages, will likely need agreement by all joint tenants. Note that any such transfer action will sever, or end, your joint tenancy and change the nature of everyone's ownership.

Joint Tenancy

Joint tenants must hold the property in equal shares; if there are four of you, each of you must own a quarter of the property. The most important characteristic of joint tenancy is the right of survivorship. This means that if one of the joint tenants dies, the entire joint tenancy remains in the hands of the surviving joint tenants. For this reason, a joint tenant can't leave his share to his heirs unless he is the only surviving joint tenant, in which case he becomes the sole owner of the property. All joint tenants have the right to use and enjoy the property, but not exclusively. One joint tenant can't do anything to interfere with the others' rights.

Permission to Mortgage

In general, joint tenants need permission from each other to transfer or encumber the property. Mortgage is an encumbrance; though it doesn't entirely give away your interest, it does give the mortgage lender a theoretical right to seize the property if certain events occur. So a mortgage will typically need consent from all other joint tenants. However, joint tenants often execute private ownership agreements which have the power to change these rules. If you and the other joint tenants have signed an agreement that says any of you can mortgage the property without consent, then you won't need their permission.

Effects of Mortgage

When one owner transfers his share, voluntarily or involuntarily (for instance, losing the share in a lawsuit), the transfer effectively severs the joint tenancy. So if you transfer your share, the remaining joint tenants will no longer be joint tenants but tenants in common, a different legal relationship. State law is divided on whether creation of a mortgage constitutes a transfer sufficient to sever a joint tenancy. When it comes to mortgages, more than half the states follow the lien theory, which states that the mortgage itself is not a true transfer. In these states, a mortgage itself won't sever joint tenancy; severance would only come if your mortgage lender foreclosed on you and sold the land. However, the remaining states follow the title theory, which finds that the mortgage itself is a transfer that will sever joint tenancy.

Tenancy in Common

Once a joint tenancy is legally severed, the joint owners cease being joint tenants and become tenants in common. Tenancy in common has no right of survivorship; each individual owner has the right to leave his share of the ownership to heirs. Unlike joint tenancy, tenancy in common also allows the owners to hold unequal shares of the property. Tenants in common can transfer their shares of the property without the consent of the other tenants.