Disclaimer: This article educates readers on Michigan partition law and does not provide legal advice. Consult a qualified attorney for guidance on your specific case.
Detailed Answer
When co-owners cannot agree on dividing a jointly owned property, Michigan’s Partition of Real Estate Act (MCL 600.3101 et seq.) governs the process. This section explains how existing mortgage obligations affect a partition sale and the distribution of proceeds.
1. Attachment of Mortgage Liens
Michigan treats recorded mortgages as liens that remain attached to the property throughout partition. The court cannot clear these liens without full payment. See MCL 600.3112.
2. Sale Process and Payment Priorities
When the court orders a sale, it conducts a public auction under MCL 600.3101. The court clerk holds the proceeds and pays valid liens in this order:
- Mortgage holders in order of recording date
- Unpaid property taxes and special assessments
- Mechanics’ and judgment liens
- Costs of sale and court fees
3. Distribution of Net Proceeds
After satisfying encumbrances, the clerk divides the remaining funds according to each co-owner’s ownership share. For example, two co-owners with 50% interests each receive half of the net proceeds. Co-owners who paid more than their share of mortgage or tax payments may seek adjustments, but the court adheres to recorded interests unless parties file and prevail on objections under MCL 600.3110.
4. Buyout Alternative
Instead of a public sale, co-owners can agree that one party buys out the others. The buyout price equals the appraised property value minus the outstanding mortgage balance. The buyer either assumes the mortgage or pays it off. Parties then submit a consent order to the court to finalize the buyout.
Helpful Hints
- Obtain up-to-date mortgage payoff statements before filing for partition.
- Order a professional appraisal to set realistic sale or buyout prices.
- Review public records for other liens, such as unpaid taxes or judgments.
- File objections under MCL 600.3110 promptly if you dispute a lien amount or priority.
- Consider negotiating a buyout to avoid auction costs and timeline delays.
- Work with a real estate attorney to ensure proper notice, filings, and compliance with court rules.