Concurrent Estate - Mortgages To Break Joint Tenancy

Mortgages To Break Joint Tenancy

If one joint co-owner takes out a mortgage on jointly owned property, in some jurisdictions this may terminate the joint tenancy. Jurisdictions which use a title theory in this situation treat a mortgage as an actual conveyance of title until the mortgage is repaid, if not permanently. In such jurisdictions, the taking of a mortgage by one owner terminates the joint tenancy as to that co-owner. There are exceptions, and the law in the State of Georgia is a notable exception.

In Georgia, joint tenancy is commonly conveyed in a deed as "Joint Tenants with Rights of Survivorship". The legal effect of this type of tenancy is a "life estate" with a "contingent remainder". Translated, this means that the interest of each joint tenant can be thought of in two parts: the "present" interest while the parties are both alive and what happens in the "future" when one of the tenants dies. Viewed separately, the interest of each independent co-tenant is only "temporary" interest while they both co-tenants are alive and neither owns a "full" interest. The "full" interest is determined by who outlives the other and vests automatically in the survivor at, and only at, the time of death. In the case of a mortgage executed by only one of the living joint tenants, the mortgage does not sever the tenancy. Instead, the mortgage is interpreted as conveying whatever interest the debtor holds. In this example, that would be the debtor's life (or "temporary") estate only, since both parties are still living, but the lender would also be entitled to the full estate, but only if the debtor were to outlive the other joint-tenant. Consequently, if the debtor dies first, the co-tenant, who is not party to the mortgage, would take full ownership interest of the property free and clear of the mortgage. In sum, under Georgia law, execution of a mortgage (called a "Deed to Secure Debt" or "Security Deed") by one co-tenant does not sever the joint tenancy.

However, in jurisdictions which use the lien theory, the mortgage merely places a lien on the property, leaving the joint tenancy undisturbed. As a lien is not enough to terminate a joint tenancy, if the debtor dies before the creditor sues, the creditor is left with no claim against the property, as the debtor's interest in the property evaporates and automatically vests in the other surviving co-owners.