NSW Buying property tenants in common when it has a mortgage

Australia's #1 for Law
Join 150,000 Australians every month. Ask a question, respond to a question and better understand the law today!
FREE - Join Now


28 August 2020
Hi All,

About 35 years ago my grandfather bought 100 acres of land with three friends. The group of four 'friends' still own the property as tenants in common, each with 25% ownership, and each with their own dwelling on a portion of the property. My grandfather made the purchase without the need for a loan.

My grandfather wishes to sell to his portion of the property to me, which I understand he can freely do without the consent of the other three friends. I understand that technically I would be buying 25% of the whole property as opposed to the dwelling that he has specifically been occupying for several decades. I note also that there is no co-ownership agreement preventing him from selling his share of the property.

I have paid for a title search of the property and was quite startled to see that the property has a mortgage over it. The folio record states that: "NO CERTIFICATE OF TITLE HAS ISSUED FOR THE CURRENT EDITION OF THIS FOLIO. CONTROL OF THE RIGHT TO DEAL IS HELD BY [Name of bank]." Likewise, under the Second Schedule it is noted that there are two mortgages on the property.

My uncle is not on speaking terms with his old friends and the exact circumstances of these mortgages is unclear, but I read the following on the website of an Australian legal firm:

"Whether you are a joint tenant or a tenant in common, if the property is owned subject to a mortgage, the owners will invariably be jointly and severally liable to the mortgagee under the terms of the mortgage. It is, therefore, possible for you to own 1% of the land, yet be separately, indeed in effect wholly, liable for the mortgage debt if the property is sold by mortgagee sale and there is a shortfall."

The above statement seems absurd. How can my grandfather, in the event of a forced sale, be liable for a loan he never consented to? Similarly, how can it be the case that I become jointly and severally liable for someone else's loan in the event I purchase his share of the property, and a sale is forced upon me? I don't think I have any means of finding our just how big these two mortgages are. The amount owing could potentially exceed the 25% value of the property I am hoping to purchase.

I think I must somehow be taking the above legal advice out of context. Can anyone clarify the situation for me?

Thank you kindly for your assistance.

Last edited: