Can a Creditor Do a Lien Against a Co-Owner of Jointly Held Real Estate?

Liens can attach to jointly owned real estate.

A creditor can only acquire a lien through either the consent of the property owner or through a specific statutory or judicial proceeding. Generally, a creditor with the right to place a lien on the property belonging to the debtor can assert that lien even if the debtor is a co-owner of jointly held real estate. The lien simply attaches to the debtor's partial ownership interest.

Voluntary Lien

A co-owner of property has valuable ownership interest in jointly held real estate, and that valuable interest can serve as collateral for a mortgage loan. In that case, a co-owner can grant a mortgage lender a voluntary lien on the co-owner's interest in the property. The lien attaches only to the co-owner's separate interest; it does not attach to the ownership interest of the other co-owners.

Other Liens

A creditor can also sometimes obtain a non-voluntary lien against a co-owner of jointly held real estate. For example, if a creditor obtains a judgment against one of the co-owners, the judgment constitutes a lien on that co-owner's interest in the real estate. Again, like a voluntary lien, the judgment lien does not attach to the other co-owners' interests in the property.

Effect

The effect of a lien on a piece of jointly held real estate is different depending on each co-owner. A co-owner who has no relationship to the lien creditor can freely sell or convey her separate interest in the jointly owned real estate. However, the co-owner who is the debtor to the lien creditor will be restricted in his ability to sell or convey his interest in the property.

Spouses

The rules change somewhat if the co-owners of the real estate are spouses living in a community property state. In a state that follows community property law, the marital property of one spouse is generally considered the property of the other spouse, so a lien against one of the spouses' ownership interest will constitute a lien against both spouses' ownership interests.

References

• "Modern Real Estate Practice"; Fillmore W. Galaty, Wellington J. Allaway, and Robert C. Kyle; 2007