Disclaimer: This article is for informational purposes only and does not constitute legal advice.
Detailed Answer
In Alabama, a partition action allows co-owners to divide property when one party seeks to sell. If the court orders a sale, it designates an agent—often a trustee or commissioner—to sell the real estate and distribute net proceeds. Mortgages and other liens on the property affect how proceeds are applied and shared.
Under Ala. Code § 35-10-26 and Ala. Code § 35-10-28, the court follows a strict order of payment: costs and expenses first, then lien holders by priority, and finally co-owners according to their ownership interests.
1. Encumbrances and Sale Proceeds
Mortgages are legal liens recorded against the property. The sale agent must satisfy these liens in the sequence they were recorded. A senior mortgage gets paid in full before any junior mortgage. If proceeds fall short, junior lien holders may pursue deficiency judgments outside the partition action.
2. Application Process
- Costs of partition and sale (commissions, advertising, trustee fees)
- Property taxes and special assessments
- Mortgage payoffs in recording-date order
- Distribution of remaining balance to co-owners based on ownership percentage
3. Example Scenario
Three siblings own equal one-third interests in a home subject to a $100,000 first mortgage and a $20,000 second mortgage. The court orders sale at $150,000 with $5,000 in sale costs. The sequence is:
- Pay sale costs: $5,000
- Pay first mortgage: $100,000
- Pay second mortgage: $20,000
- Divide remaining $25,000 equally ($8,333.33 each)
Helpful Hints
- Review the chain of title to identify all recorded liens before filing for partition.
- Obtain payoff statements from mortgagees shortly before the sale date.
- Account for unpaid property taxes or HOA dues, which may take priority over mortgages.
- Understand that deficiency claims against co-owners can arise if junior liens exceed surplus proceeds.
- Consider hiring a title company or real estate attorney to clear encumbrances before closing.