Legal Question in Real Estate Law in California
Owner #1of two owners on title, used his equity line of credit which is in his name only, to its max without the consent of owner #2. This happened after owner #2 was added to title...now property is upside down. The original loans amounts were documented and signed by both owners in an agreement that neither will take out any notes, loans, etc....without the others consent. What can owner #2 do legally to demand the equity be paid back and bring the loan down to its original owed amounts ? Also, does Owner #2 become liable for these loans eventhough his name is not on either the mortgage or the home equity line?
1 Answer from Attorneys
First, there is nothing wrong with what Owner #1 did except that it appears to be in breach of his agreement with Owner #2. Owner #2 can therefore sue Owner #1 for breach of contract, but cannot un-do the loan or the resulting lien.
However, the lien probably affects only Owner #1's interest in the property. If the lender foreclosed, if I understand the facts properly, the lender could sell only Owner #1's interest as a tenant in common, and the buyer at the foreclosure sale would become Owner #2's new co-owner.
Since most buyers of foreclosure properties don't want to become half owners of a single-family dwelling, there isn't much market and therefore not much interest in foreclosing, or, for that matter, making such loans on a partial interest in the first place.
This is a rather general statement of legal principles, and for one reason or another, including facts not given, your situation might differ, but probably not.
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