What to do if a co-tenant refinances or takes a home-equity loan on inherited property in California

Short answer: In California a co-tenant can generally encumber only the undivided interest they actually own. A lender will normally require all owners on title to sign for a loan secured by the whole property. If a co-tenant appears to have refinanced or taken a home equity loan without your approval, you should quickly check title records, contact the lender and a lawyer, and consider remedies such as asking the court to quiet title, block a wrongful foreclosure, or file a partition action. This article explains how these situations typically work under California law and what steps you can take.

Detailed answer — how ownership, loans, and remedies interact in California

1. Understand who owns what: joint tenancy vs. tenancy in common

When people inherit property, title often ends up as either joint tenancy (with rights of survivorship) or tenancy in common (each owner has an undivided fractional interest). The type of ownership determines what each co-owner can do with the property:

• If the property is held as joint tenants, a surviving joint tenant generally owns the whole property automatically by operation of law. If title was properly transferred to you as a surviving joint tenant, the other person cannot later encumber the property you now own alone.
• If the property is held as tenants in common, each co-tenant owns a fractional, undivided interest (for example, 50%). A co-tenant can usually sell or mortgage only their own undivided interest, not the entire parcel, unless the other co-tenants also sign.

2. What a co-tenant can and cannot legally do

– A co-tenant may sign a deed of trust or mortgage that encumbers only the interest they own. That means a loan can be secured against that fractional interest. A lender that accepts only one co-owners signature will typically obtain security over that co-owners share, not a valid lien on the whole property, unless other owners also signed.

– In practice most lenders require all owners on the recorded title to join the loan for the lender to get a first lien on the whole property. If the lender does not have signatures from all owners, its practical ability to force a sale of the entire property may be limited.

– However, if a co-tenant fraudulently forges documents or induces another person to sign, that creates additional legal issues (forgery, fraud) and may not protect a lender that later forecloses. California foreclosure law and defenses may then apply. See California Civil Code §2924 regarding nonjudicial foreclosure procedures: Civ. Code §2924.

3. What happens if a loan or refinance is recorded

• If a deed of trust covering the whole parcel is recorded and it was signed only by one co-tenant, a search of the county recorders records will show the encumbrance. That recorded document gives notice to others and can complicate title and future sales.
• If the lender obtained a valid lien against only the signing co-tenants fractional interest, the lender may foreclose on that interest. A foreclosure sale of a fractional interest usually yields an owner of the interest who takes subject to the rights of the remaining co-tenants. It does not automatically eject the other co-owners from the property unless the court orders otherwise.
• Because of these complications, courts and title companies treat missing signatures, possible forgeries, or hidden liens as serious problems. You have remedies available in court.

4. Common legal remedies in California

• Quiet title / declaratory relief: Ask a court to declare who owns what and to remove improper liens from the title.
• Injunction: If a wrongful refinance or pending foreclosure is imminent, you can ask a court for a temporary restraining order or preliminary injunction to halt foreclosure or sale while the dispute is resolved.
• Partition action: A co-tenant may ask the court to partition the property (divide it physically if possible or sell it and split proceeds). Partition actions in California are governed by the Code of Civil Procedure. See the partition statutes starting with CCP §872.010: CCP §872.010. A partition sale can also clear competing liens and provide a clean distribution.
• Rescission / reconveyance / damages: If the loan was obtained by fraud or forgery, you can seek rescission of that loan, reconveyance of any wrongful deed, and monetary damages. Criminal charges (forgery) may also apply against a wrongdoer.

5. Timing and practical consequences

Act quickly. Record searches, title reports, and lender contact should happen as soon as you suspect an unauthorized loan. Foreclosure timelines in California differ depending on whether the loan uses a deed of trust and nonjudicial foreclosure procedures; see Civ. Code §2924 for the notice and sale procedures. Quick action increases your chances to block a wrongful sale or negotiate a resolution.

What you should do next (step-by-step)

1. Get a copy of the recorded title and documents. Search the county recorder or order a title report. Look for any recorded deeds of trust, assignments, or reconveyances.
2. Confirm how title is held. Determine whether you and the other owner(s) hold title as joint tenants or tenants in common. This status controls what each owner can encumber.
3. Contact the lender immediately. Ask what signatures they have, what they recorded, and whether they obtained a trustees deed or foreclosure notice.
4. Preserve evidence. Save emails, letters, recorded documents, and anything showing whether you consented. If you suspect forgery, notify the title company and law enforcement.
5. Talk with a California real estate or probate attorney. An attorney can advise whether to seek an injunction, quiet title, partition, or damages, and can handle filings such as a lis pendens if litigation is needed.
6. Consider negotiation or buyout. If you want to keep the property, you might try to negotiate a buyout of the other co-tenants interest or refinance all owners onto a single loan.

How courts typically resolve disputed encumbrances

Courts look at recorded documents, actual signatures, and the lenders reliance. If a lien is valid only against the signing co-tenant, the court can resolve priorities among liens, order sale of the whole property in partition, or order reconveyance if fraud occurred. Partition actions are a common final remedy when co-owners cannot agree; see California Code of Civil Procedure §872.010 and following sections: CCP §872.010.

Important California statutes to review

• Nonjudicial foreclosure procedures: California Civil Code §2924 — https://leginfo.legislature.ca.gov/faces/codes_displaySection.xhtml?sectionNum=2924.&lawCode=CIV
• Partition of real property: California Code of Civil Procedure §872.010 (and following sections) — https://leginfo.legislature.ca.gov/faces/codes_displaySection.xhtml?sectionNum=872.010.&lawCode=CCP

Disclaimer

This is general information about California law and is not legal advice. Every case is different. Consult a licensed California attorney promptly for advice that applies to your specific situation.

Helpful Hints

• Check the county recorder online for any recorded mortgages or deeds against the property.
• Get a title report early — it shows recorded liens and ownership status.
• If you see a pending foreclosure sale, move quickly: contact a lawyer and the lender right away.
• Do not sign anything until you understand what it does to title and your rights as a co-owner.
• If you suspect forgery, preserve documents and contact both an attorney and local law enforcement.
• Consider whether negotiation (buyout or joint refinance) could be faster and cheaper than litigation.
• Keep copies of all communications and records; they matter in court and in settlement talks.