What to know if a co-owner refinances or takes a home equity loan on inherited property in Vermont

Short answer: In Vermont, a co-owner generally cannot bind another co-owner to a loan without that co-owner’s signature. A co-owner may be able to mortgage only their own fractional interest, but that can still put the whole property at risk in practice. Remedies include asking the court for injunctive relief, a declaratory judgment, or a partition sale. This is general information and not legal advice.

Hypothetical fact pattern (example)

Two siblings inherit a house as tenants in common. One sibling signs a mortgage or refinances the house without telling the other. The lender records a mortgage and later begins foreclosure proceedings when the signing sibling falls behind.

Detailed Answer

Start with the ownership type. Most inherited property that is not explicitly held as joint tenants with right of survivorship is owned as tenants in common. Each co-owner holds an undivided fractional interest in the whole property. That means:

Each co-owner can usually deal with their own fractional interest — for example, sell it or attempt to mortgage it.
A lender usually wants every co-owner to sign any mortgage because a mortgage that binds only one co-owner’s fractional interest can be risky for the lender. In practice many lenders will refuse loans unless all owners sign.

If a co-owner signs a mortgage alone

The mortgage likely covers the signer’s fractional interest. It does not automatically erase your separate ownership right. But because the mortgage will be recorded against the real property, it can cloud title and affect marketability.
If the lender forecloses on that mortgage, the foreclosure sale can force the sale of the property and the proceeds are distributed — the non-signing co-owner would receive the fair share of sale proceeds after the lender is paid, but they could lose physical possession.
If the co-owner obtained the loan by forging your signature, lying about title, or committing fraud, you can ask a court to set aside the mortgage and seek damages. Fraudulent conveyances or forged signatures are not binding on you.

Practical legal remedies in Vermont

Quiet title / declaratory judgment. You can ask a Vermont court to declare the parties’ rights in the property and to clear any fraudulent or improper liens.
Injunction or lis pendens. You may be able to obtain a temporary injunction to stop a sale or foreclosure while the court decides the dispute. Recording a notice of the dispute (a lis pendens or equivalent) can warn potential purchasers and lenders that title is contested.
Partition action. You can ask the court to partition the property — either by physically dividing it (rare) or by ordering a sale and dividing the proceeds. Partition actions are common when co-owners cannot agree.
Set-aside for fraud. If the mortgage was obtained through forgery, fraud, or material misrepresentation, a court can set it aside and award related relief.

What happens if the lender forecloses?

If a foreclosure is valid and the lender has a properly recorded lien, foreclosure can result in sale of the property. After foreclosure sale, the lender is paid first, and any remaining proceeds are divided among owners according to their ownership interest. A non-consenting co-owner may still lose possession and must bring claims to contest the mortgage or foreclosure if there are viable defenses (e.g., forgery, fraud, lack of authority).

How Vermont law and public records play a role

Most consequences turn on title and recorded documents. Vermont’s statutes and town land records govern recording of deeds and mortgages and impact notice to third parties. For statutes and to search recorded instruments, consult the Vermont Statutes Online and local land records:

Vermont Statutes Online: https://legislature.vermont.gov/statutes/
Vermont Judiciary (civil procedure and court forms): https://www.vermontjudiciary.org/

Step-by-step actions to take right away

Obtain copies of the deed and any recorded mortgage from the town clerk’s land records for the town where the property sits.
Do not sign or acknowledge anything without speaking to a lawyer.
Contact the lender in writing. Ask what documents they relied on and whether all owners signed. Keep copies of all correspondence.
Consider sending a demand letter to the co-owner who refinanced, asking them to provide loan paperwork and to halt any sale or encumbrance.
Consult a Vermont real estate attorney quickly — you may need an emergency injunction to stop a pending sale or foreclosure.
If foreclosure starts, preserve evidence (recordings, communications, loan documents) and raise defenses promptly in court.

Costs and timeline

Litigation (quiet title, injunction, partition) takes months and can cost several thousand dollars or more depending on complexity. An emergency injunction can sometimes be obtained faster, but a hearing is still required. If you are on a limited budget, ask about mediation, co-owner buyouts, or negotiating with the lender for a forbearance while you resolve ownership issues.

Helpful Hints

Gather documents first: deed, probate documents, any recorded mortgages, and correspondence. This speeds any title search and lawyer review.
Check how title is held. “Tenants in common” vs. “joint tenants with right of survivorship” changes some rights and the way proceeds are divided.
Record checks: search the town clerk’s land records online or in person to see if a mortgage was recorded.
Act quickly once you learn of a recorded mortgage or foreclosure — delays can limit your remedies.
Do not pay someone else’s mortgage to protect your interest without written agreement — get legal counsel first.
Consider mediation to resolve disputes with co-owners if both sides are willing; it’s often cheaper and faster than court.
Ask about legal aid or limited-scope help if you cannot afford a full-retainer attorney. The Vermont Bar Association can help locate counsel: https://www.vtbar.org/