Disclaimer: This article is for informational purposes only and does not constitute legal advice.
Detailed Answer
When co-owners file a partition action under Massachusetts law (M.G.L. c.241), any existing mortgages remain valid liens on the property. Typically, the court orders a judicial sale under M.G.L. c.241 §2. At that sale, mortgage liens attach to the sale proceeds in the order of their recording date.
First, the commissioner or auctioneer uses the gross proceeds to pay off outstanding mortgages and other encumbrances. If the sale proceeds fall short of the total mortgage balances, a recourse lender may pursue a deficiency judgment against co-owners personally, subject to the terms of the mortgage contract. Nonrecourse loans generally limit recovery to the collateral itself.
Next, the court deducts sale costs, court fees and any commission. Finally, the net proceeds distribute among co-owners according to their ownership shares, as directed by M.G.L. c.241 §4. This sequence ensures that mortgage lienholders receive priority payment and that co-owners receive a fair division of what remains.
Helpful Hints
- Obtain a mortgage payoff statement early to gauge lien amounts and potential deficiencies.
- Confirm lien priority by checking the registry of deeds; earlier-recorded mortgages rank higher.
- Review your mortgage contract to know if the lender can pursue a deficiency judgment.
- Explore a negotiated buyout among co-owners to avoid sale costs and court delays.
- Consult an attorney familiar with M.G.L. c.241 to review payoff calculations and distribution plans.