Getting Your Share of Net Proceeds After a Partition Sale in Hawaii
Detailed answer — how the process works and what you must do
If a court orders a partition sale of a co-owned house in Hawaii, the court supervises the sale and the distribution of the money. To get your share of the net proceeds you must: confirm your ownership share, review the sale accounting, resolve any liens or claims, and ask the court clerk to release your portion once the court approves distribution. Below is a clear step-by-step explanation of how that happens under Hawaii law and practical steps you can take.
1. Who controls the proceeds immediately after the sale?
When the court orders a partition sale, proceeds typically go into the court registry or are held by a court-appointed commissioner or escrow agent until the court signs a final distribution order. The court controls the funds until it approves a final accounting and distribution. See Hawaii’s partition statutes for the general procedure: Haw. Rev. Stat. ch. 669 (partition).
2. Confirm your ownership share
Start by confirming how title shows your interest (tenants in common, joint tenants, life estate, etc.). Your percentage interest usually determines your share of the net proceeds after deductions. If ownership percentages are unclear, the court may determine each party’s share during the partition action.
3. Review the accounting before distribution
The party handling the sale (a commissioner or closing agent) must prepare a written accounting listing gross sale proceeds and all deductions: mortgages and other liens, realtor commission, title and escrow fees, property taxes, approved repairs, court costs, and any liens for unpaid obligations. The court reviews that accounting and signs an order approving the amounts to be paid out before it orders distribution.
4. Common deductions the court will pay first
- Mortgage and recorded liens (these must be paid off from the sale proceeds to clear title).
- Real estate broker commissions and closing costs.
- Court costs and fees for the commissioner or escrow agent.
- Property taxes and assessments due at closing.
- Reasonable costs for repairs or maintenance the court allowed prior to sale.
5. How the court distributes net proceeds
After the court approves the accounting and confirms the deductions, it enters a distribution order. The court directs the clerk or escrow agent to pay creditors first (mortgages, lienholders). The remaining net proceeds are divided according to each co-owner’s interest as the court has determined. The clerk or commissioner issues checks or wires each owner’s share per the court order.
6. If you disagree with the accounting or distribution
If you think the deductions are wrong or your computed share is incorrect, file an objection or motion in the partition case promptly. Objections must follow the court’s deadline and rules. Common disputes involve contested lien payoffs, disputed ownership shares, or unapproved charges. The court will hold a hearing to resolve disagreements before ordering distribution.
7. What to bring to collect your share
When funds are ready to be released, be prepared to provide identification and any documents required by the clerk or escrow agent (for example, a signed receipt, a W-9 for tax reporting, or a joint signature if the court orders checks payable to multiple owners). If funds are sent by wire, confirm the receiving account information in writing and follow the clerk/escrow agent’s verification procedures.
8. If creditors or judgments claim your share
If a co-owner has outstanding judgments or garnishments, a creditor may try to attach that co-owner’s share before distribution. The court will typically resolve priority claims and may withhold a disputed owner’s portion until the creditor’s right is resolved. If you anticipate creditors, raise that issue early in the case so the court can address competing claims.
9. Timing — how long before you get paid?
Timing depends on the complexity of the sale and any objections. If the sale and accounting are straightforward and no one objects, distribution often follows within weeks after the court approves the accounting. If disputes arise, distribution can be delayed for months until the court resolves the issues.
10. Taxes and reporting
Net proceeds from a partition sale may have tax consequences (capital gains, basis allocation, etc.). The court or closing agent may issue information returns (such as IRS forms) as required. Consult a tax professional for how to report your share on your federal and state tax returns.
Quick hypothetical example
Three siblings own a house as tenants in common (equal thirds). The house sells for $600,000 in a court-supervised partition sale. The mortgage payoff is $200,000, realtor commission and closing costs total $42,000, property taxes and allowed repairs are $3,000, and court/escrow fees are $2,000. Net proceeds = $600,000 − $247,000 = $353,000. Each sibling’s share (one-third) = $117,666.67 (subject to final court approval and any liens or creditor claims against an individual owner).
Where to find the law
Hawaii’s statutes governing partition are in the Hawaii Revised Statutes, chapter on partition. See: Haw. Rev. Stat. ch. 669 — Partition. For court procedures, consult the Hawaii State Judiciary website: courts.state.hi.us.
Helpful Hints
- Get a copy of the deed and the complaint/answer in the partition case to confirm ownership percentages.
- Ask for the full written accounting from the commissioner or escrow agent and review every deduction line-by-line.
- If a mortgage or lien exists, request lien payoff statements to confirm the correct amounts were paid.
- File objections quickly if you dispute any charge or distribution. Courts enforce deadlines.
- Keep records: receipts for repairs, invoices, correspondence, and the court’s distribution order.
- Expect to provide a W-9 or tax-identification information before the clerk releases funds.
- If other creditors claim a co-owner’s share, ask the court for guidance—don’t assume funds will be paid out immediately.
- Consult a qualified Hawaii attorney if ownership shares are contested, liens are complicated, or you face creditor garnishment. An attorney can file motions and represent you at hearings.
- Talk with a tax professional about capital gains treatment and how to report your proceeds.