Understanding Your Rights When a Co-Tenant Encumbers Inherited Property in Oregon

Short answer: In Oregon, a single co-tenant generally can only mortgage or refinance the undivided interest that they own. A lender may record an instrument against the whole parcel, but the mortgage is enforceable only against the borrowing co-tenant’s interest. If that co-tenant defaults, the lender’s remedies typically reach only the borrower’s share; however, a foreclosure or lien can lead to a forced sale of the property and affect all co-owners. You have court remedies including a partition action, an injunction, and damages if the encumbrance was improper or made in bad faith.

Disclaimer

This information is educational only and not legal advice. Consult a licensed Oregon attorney to analyze your specific facts and protect your rights.

Detailed answer — what happens and what you can do

1. Who can take out a loan on the property?

How much authority a co-tenant has depends on how title is held:

If title is held as tenants in common (the common form for inherited property), each co-tenant owns an undivided fractional interest. A single co-tenant can typically borrow against only that co-tenant’s undivided interest, not force the other owners to be personally liable for the loan.
If title is held solely in one person’s name (for example, the estate transferred title to one heir), that person can generally encumber the whole property.
If a co-tenant is acting as an executor, personal representative, trustee, or has power of attorney, their authority to encumber the property depends on the instrument that grants those powers and probate trustee rules.

2. What does a recorded mortgage or refinance mean for the non-borrowing co-tenant?

When a mortgage or deed of trust is recorded against the property, it appears in the public record as affecting the parcel. But legally:

The lender’s security interest is valid against the borrowing co-tenant’s share. The lender cannot typically pursue the non-borrowing co-tenant’s separate assets or personal credit for that loan.
If the borrower defaults, the lender may foreclose on the borrower’s share. A foreclosure purchaser acquires whatever interest the borrower had—often an undivided fractional interest—unless state law or the foreclosure process results in a sale of the whole property.
Because a purchaser at foreclosure may own an undivided share with you, that can create a new co-owner who may seek partition or to force a sale of the whole property.

3. Can a lender foreclose and force sale of the entire property?

Yes, in practical effect a foreclosure or a partition action can lead to sale of the entire parcel. A purchaser at foreclosure normally steps into the borrower’s interest; that purchaser can later seek a partition or a court-ordered sale of the whole property, which can affect all co-owners. For related procedures and remedies under Oregon law, see the statutes governing partition actions: ORS chapter 105 (ORS 105.005 et seq.).

4. What if the encumbrance was taken without authority (fraud, misrepresentation, or during probate)?

If the co-tenant lacked authority (for example, title was in the estate and only the personal representative had authority to sign, or a co-tenant acted fraudulently), you may have grounds to:

Ask a court to set aside the mortgage or deed because it was procured by fraud, forgery, or without required authorization.
Seek an injunction to stop a pending foreclosure sale while the court sorts out ownership and authority.
Pursue money damages if the co-tenant breached fiduciary duties or acted negligently in managing shared property.

5. Common court remedies in Oregon

Partition action — A co-owner can file a partition action to force a division of the property or a sale and distribution of proceeds. See ORS chapter 105 (ORS 105.005 et seq.).
Quiet title or declaratory judgment — Ask the court to declare who owns what interests and to clear title defects.
Injunction or lis pendens — You can ask the court to freeze a transaction or record notice of your claim so buyers/lenders see the dispute.
Damages — If a co-tenant misused the property or funds, you may recover losses.

Hypothetical examples (to illustrate)

Example A — Tenants in common: limited borrowing

Alice and Ben inherit a cottage as tenants in common (50/50). Alice signs a mortgage using only her interest to secure a home equity loan. The lender records the mortgage against the property. If Alice defaults, the lender can foreclose on Alice’s 50% interest. The lender does not automatically get Ben’s 50% share or make Ben personally liable for the loan—but the resulting new owner of Alice’s share could seek a sale of the whole cottage by partition.

Example B — Title in one heir or during probate

If the probate court has vested title in Carol alone, Carol can generally refinance the property without other heirs’ signatures. If title is still in the decedent’s name and someone purports to refinance without probating the will or being the appointed personal representative, that person may lack authority and the transaction could be challenged in court.

Immediate steps to protect your rights

Order a current title report or deed search. Confirm how title is held and whether a new mortgage or deed of trust is recorded.
Ask for copies of the loan documents and any documents that purportedly authorize the transaction.
Contact the lender and title company. Tell them you are a co-owner and explain any title or authority concerns.
Consider filing a lis pendens or asking an attorney to seek a temporary injunction if a foreclosure or transfer is imminent.
Talk to a real estate or probate attorney in Oregon to evaluate whether to pursue partition, quiet title, or fraud claims.

Helpful Hints

Get clear proof of how title is held: deed, probate order, or trust document.
Keep records of all communications and documents involving the loan or refinance.
If you learn of a recorded encumbrance, act quickly — delay can make remedies harder or more expensive.
Refinancing during an open probate can be improper unless a personal representative or court approves. Confirm authority before accepting a transaction as valid.
Even if the lender recorded a lien against the property, that does not automatically mean the lender can collect from you personally. Still, a recorded lien can create practical risks and complications.
Before negotiating a buyout or settlement, get a current appraisal so you know the property value and how refinancing affects each owner’s equity.

Relevant Oregon law

Partition remedies and procedure are governed by Oregon law. For the statutes on partition actions, see ORS chapter 105: https://www.oregonlegislature.gov/bills_laws/ors/ors105.html.

Next steps

If you’re facing this situation, collect title documents and recorded instruments first. Then consult a licensed Oregon real estate or probate attorney promptly. Time-sensitive steps (like seeking an injunction or lis pendens) can protect your rights while the court decides ownership and authority questions.

Reminder: This article provides general information about Oregon law and is not legal advice. Contact a licensed Oregon attorney to get advice tailored to your situation.