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Joint And Several Liability
Joint and several liability refers to the legal status whereby a lender will be able to collect the full amount due from any single party even if there are co-borrowers.
This helps to legitimately protect the interest of lenders from borrowers who push the responsibility of debt obligations to each other.
For example, if a mortgage note on property is made by co-borrowers or in a joint tenancy ownership structure, it is not necessary for the lender to collect 50% of amount due from each of the 2 borrowers.
This means that the liability of each borrower does not have a limit of 50% of the debt.
If one party is totally broke, the lender will still be able to take a legal route to collect all that is due to the other party.
This is another reason why any real estate investor should choose their partners wisely.
Take note that the concept is different with partners being just severally liable.
With several liability, partners are only liable to their obligations to a debt.
For example, a business with 3 partners might take up a loan with debt share of 50%, 30%, and 20% respectively.
Should the third partner default, a lender will only be able to pursue that specific partner for the debt.