Joint and Several Liability

What It Means

Joint and several liability is a legal doctrine under which each Co-borrower who signs a Promissory Note is individually responsible for the full outstanding loan balance — not just a proportional share. If one co-borrower fails to pay, the lender can pursue any other signer for the entire remaining debt, regardless of that person's Ownership Share or what the co-owners agreed to split internally.

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This is the standard legal structure for most joint mortgages in the United States. The lender's right to collect from any individual signer exists independently of whatever cost-sharing arrangement the co-owners have agreed to among themselves.

How It Works in Practice

Consider three co-buyers who purchase a property together and agree to split the mortgage payment equally in their Co-ownership Agreement. If one co-owner stops paying, the remaining two are not responsible for "their third plus a bit more" — they are each personally liable for the full mortgage balance. The lender does not recognize the internal split and will pursue whichever borrower is most collectible.

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This liability extends beyond monthly payments. It includes late fees, legal costs, and the full consequences of Default — including foreclosure. A single co-borrower's failure to contribute may damage every signer's credit, trigger foreclosure proceedings, and result in deficiency judgments against any or all co-borrowers.

Why It Matters for Co-owners

Joint and several liability is one of the most significant financial risks in co-ownership. It means that no matter how carefully co-owners structure their internal agreement, the lender's rights supersede those arrangements. The Co-ownership Agreement can define remedies between co-owners — such as Buyout triggers, default penalties, and Forced Sale provisions — but it cannot limit the lender's ability to collect from any individual borrower.

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Every co-buyer who will sign the Promissory Note should understand this exposure before closing. The Co-ownership Agreement should address what happens when a co-owner fails to pay — including notice periods, cure windows, and escalation consequences — to create an internal safety net within the constraints of the joint liability structure.

Key Points

• Each co-borrower is personally liable for the full mortgage balance, not just their share
• The lender can pursue any individual signer for the entire debt
• Internal cost-splitting arrangements do not limit the lender's collection rights
• One co-borrower's failure to pay may damage every signer's credit and trigger foreclosure
• The Co-ownership Agreement should define internal remedies but cannot override lender rights
• One of the most significant financial risks in co-ownership — must be understood before closing