Legal Question in Real Estate Law in California

What are the legal ramifications with allowing a partner in a rental to take a l

I own a rental property with 2 other people. The property

has no mortgage, it is paid in full. We each own 1/3

interest. and our names are on the deed as such.

One of the parties wishes to take out a

mortgage on their 1/3 of the house. Their lender is

recommending they have myself and the other party

sign a quit claim to take our names off of the mortgage for a few

weeks till the loan goes thru, then they will put us back on.

I have full faith that they will put us back on the deed.

However, I am unsure of the legal ramifications of this

(other than if they default on the loan, myself and the

3rd person are responsible). Is it a good idea to sign

the quit claim?


Asked on 11/08/99, 3:49 pm

2 Answers from Attorneys

Ken Koury Kenneth P. Koury, Esq.

Re: What are the legal ramifications with allowing a partner in a rental to take

What the lender is doing is asking you to participate in a fraud. By taking your names off the title the borrower is representing that he owns the entire property and that there is more security to the loan than there really is. You would be an absolute idiot to sign a quitclaim deed.

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Answered on 11/12/99, 12:47 am
Lyle Johnson Bedi and Johnson Attorneys at Law

Re: What are the legal ramifications with allowing a partner in a rental to take

I agree with Mr. Koury's answer. The lender is attempting to take advantage of you and the other 1/3 owner by lending money on 1/3 of the property and securing the loan with 100% of the property.

When you quit claim the property to the 3rd owner he become the sole owner. The deed of trust which secures the loan is on the entire property. When your 1/3 interest is redeeded to you, it will be subject to the deed of trust. If there is a default in the repayment of the loan the foreclosure will result in the entire property being sold to repay the loan.

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Answered on 11/12/99, 3:42 am


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