Legal Definitions - third possessor

Third Possessor

In civil law, a third possessor is an individual or entity who acquires ownership of a property that is already subject to a mortgage, but who is not personally responsible for the original debt that the mortgage secures.

This means that while the property itself can still be used by the lender to satisfy the debt if the original borrower defaults (e.g., through foreclosure), the third possessor's personal assets cannot be pursued by the lender to recover the outstanding loan amount. Their ownership is subject to the mortgage lien, but they did not personally promise to repay the loan.

Here are some examples:

• Inherited Property: Sarah inherits a house from her grandmother. Her grandmother had taken out a mortgage on the house years ago, and a balance still remains. Sarah now owns the house, which is still encumbered by the mortgage. However, Sarah never signed the mortgage loan documents and is not personally obligated to repay her grandmother's debt. In this scenario, Sarah is a third possessor. While the bank could still foreclose on the house if the mortgage payments stop, Sarah's personal finances (other than the house itself) are not at risk for the debt.

• Property Acquired by Gift: A wealthy entrepreneur, Mr. Chen, decides to gift a commercial building he owns to his charitable foundation. The building has an existing mortgage that Mr. Chen personally guaranteed. When the foundation accepts the deed, it becomes the owner of the building. The foundation did not sign the original loan agreement and is not personally liable for Mr. Chen's mortgage debt. The foundation is a third possessor. If Mr. Chen were to default on his loan, the bank could initiate foreclosure proceedings against the building, even though the foundation now owns it, but the foundation itself would not be personally responsible for the debt.

• Purchase Subject to Mortgage: A small investment group purchases an apartment complex from its previous owner. The previous owner had a large mortgage on the property. The investment group agrees to buy the property "subject to" the existing mortgage, meaning they acknowledge the mortgage remains on the property, but they do not formally assume the mortgage or take on personal liability for the loan. The original owner remains personally responsible for the debt. The investment group, as the new owner, is a third possessor. If the original owner fails to make payments, the lender could foreclose on the apartment complex, but the investment group's other assets would not be targeted to satisfy the debt.