Detailed Answer
Under Kentucky Revised Statutes (KRS) Chapter 426, a co-owner of real property may file a partition action when owners cannot agree on use, sale, or division. The court can order a partition in kind (physical division) or a partition by sale. When existing mortgages encumber the property, the court usually orders a sale and directs how to handle those liens.
Priority of Mortgage Liens: Kentucky follows a ‘first in time, first in right’ rule. Lien priority depends on the date each mortgage is recorded. Under KRS Chapter 426 (Partition) and the recording requirements in KRS Chapter 382, mortgages recorded first must be paid before junior liens.
Distribution of Sale Proceeds: Once the property sells, the court directs the sale officer to apply proceeds in this order:
- Payment of sale costs and court fees
- Payment of property taxes and superior government liens
- Payment of mortgage liens by priority
- Payment of any remaining junior liens or judgments
- Distribution of net proceeds to co-owners according to their ownership shares
Refer to KRS Chapter 426 for detailed procedures.
Deficiency Judgments and Personal Liability: If the sale proceeds do not fully satisfy mortgage balances, lenders may pursue a deficiency judgment against the borrowers. Kentucky law provides limited anti-deficiency protections, particularly for certain purchase-money mortgages on residential property. Co-owners should review applicable state or federal rules to determine if they qualify for these protections.
Disclaimer: This article is for informational purposes only and does not constitute legal advice. Consult a qualified attorney to discuss your specific situation.
Helpful Hints
- Order a comprehensive title search early to identify all mortgages and liens.
- Confirm lien priority by checking recording dates at the county clerk’s office.
- Understand the equity of redemption period before a partition sale closes.
- Prepare for possible deficiency judgments if proceeds fall short of mortgage debts.
- Consult a real estate attorney experienced in Kentucky partition actions.