Tom, Uma, and Victor hold a commercial warehouse in St. Louis as joint tenants with right of survivorship. Tom executes a deed of trust on his one-third interest to secure a business loan from First Bank. Tom later defaults on the loan, and First Bank initiates a trustee's sale under Missouri's non-judicial foreclosure process. The trustee's sale is completed, and First Bank's designee acquires Tom's former interest. Uma and Victor had no knowledge of the loan or the foreclosure until after the sale. Which statement correctly describes the ownership after the trustee's sale?
Correct Answer
B) First Bank's designee holds Tom's former one-third interest as a tenant in common with Uma and Victor, who remain joint tenants with each other.
When Tom executed the deed of trust on his interest, he severed the joint tenancy as to his one-third share (in Missouri, encumbering a joint tenancy interest with a lien severs the joint tenancy as to that interest). The trustee's sale completed the transfer of Tom's severed interest to First Bank's designee. The designee, having acquired the interest through a separate instrument and at a different time, cannot be a joint tenant — it takes as a tenant in common. Meanwhile, Uma and Victor, who did nothing to sever their joint tenancy relationship with each other, remain joint tenants as between themselves. The result is: Uma and Victor hold two-thirds as joint tenants; First Bank's designee holds one-third as a tenant in common.
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Related Topics & Key Terms
Key Terms:
Related Concepts
Joint tenancy is a form of co-ownership in which two or more persons hold equal, undivided interests in property with the right of survivorship. When one joint tenant dies, their interest automatically passes to the surviving joint tenants.
A leasehold estate grants the right to possess and use property for a defined period of time, without conferring ownership.
A life estate is a freehold estate that grants ownership rights for the duration of someone's life.
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