Legal Question in Real Estate Law in California

Re: Deed of trust with assignment of rents

Well, I think the usual and best answer is that if the loan application has been made by both co-owners and the loan has been approved on the assumption that both will sign, but at close of escrow only one owner shows up to sign, there will be no closing and no loan or recording.

Some other situations are thinkable and may occur from time to time. If an application is made in the name of only one of two cotenants, and the lender is willing to accept a half interest in the property as collateral, the deal will probably close and record, but only the part interest owned by the signer will be encumbered. Such situations are unusual, because a half interest as a tenant in common with a stranger is poor collateral and has little if any market.

Now, in your situation as I (by guesswork) think I understand it, you have applied jointly for a loan and the lender expects both of you to sign and thus to encumber the entire property; and you're asking what will happen if only one of you shows up at close of escrow, prepared to sign. The lender will probably blow you off and refuse to consider the deal any more. If the papers are all drawn up for two signatures, but only one signs, and the deal somehow gets funded, "closed" and recorded, we have a recipe for a lawsuit. The outcome may be dependent upon whether there was mistake or fraud, what happened to the money, and possibly whether one owner was the agent for the other, but most likely a lien is created ONLY upon the interest of the signator, not the other.

Usually, the law treats the interests of co-owners as separate, and one cannot deal with the interest of the other. Co-ownership does not, by itself, create a partnership nor an agency.