Disclaimer: This article offers general legal information only and does not constitute legal advice. Consult a qualified attorney for advice tailored to your situation.
Detailed Answer
In Illinois, a partition action lets co-owners divide or sell real property when they cannot agree on its use. When the court orders a sale, any existing mortgages remain attached to the property and must be paid out of the sale proceeds in the order of their legal priority.
1. Mortgage Lien Survives Partition
Under Illinois law, a mortgage lien survives a partition sale. The purchaser takes title subject to all recorded mortgages. The court cannot clear liens automatically; instead, it distributes sale proceeds to satisfy them. (See 735 ILCS 5/13-115).
2. Priority of Payment
The court clerk holds net proceeds after sale costs and taxes. It then pays off liens by priority:
- First, senior mortgages and deeds of trust by recording date
- Next, any junior mortgages or mechanic’s liens
- Finally, any IRS or judgment liens
If the proceeds cover only part of the liens, the court divides them proportionately among lienholders, honoring senior liens first.
3. Distribution of Surplus
After satisfying mortgage and lien obligations, the remaining balance constitutes the “surplus.” The court distributes that surplus among co-owners according to their ownership interests, unless the court prescribes a different split based on contribution to mortgage payments or improvements (735 ILCS 5/13-115).
4. Deficiency Claims
If sale proceeds fall short of the mortgage balance, the lender may pursue a deficiency judgment against the co-owner guarantors. Co-owners should review mortgage terms to understand personal liability risks.
Helpful Hints
- Review Title Early: Obtain a title commitment to identify all recorded mortgages and liens.
- Understand Priority: Older mortgages get paid before newer ones. Confirm recording dates.
- Estimate Costs: Account for sale expenses, taxes, and liens when projecting net proceeds.
- Consider Buyout: Co-owners can avoid a public sale by negotiating a buyout and refinancing existing debt.
- Protect Your Share: Document mortgage payments you make to claim credit at sale distribution.
- Seek Expert Help: A real estate attorney can confirm lien priorities and guide you through court procedures.