Detailed Answer
In New Mexico, when co-owners cannot agree on possession of real property, one or more owners may file a partition action under NMSA 1978 § 42-6-1 et seq. If the court orders a sale instead of a physical division, the property sells and the proceeds distribute among the parties. Any mortgages or other liens recorded against the property remain attached to it at the time of sale.
Under NMSA 1978 § 42-6-20, the partition officer must use the sale proceeds to pay all costs of sale, including broker fees and court costs, and then satisfy existing mortgage liens. Liens rank by recording date under NMSA 1978 § 47-7-28. The officer pays the lienholders in priority order before distributing funds to owners.
After paying costs and satisfying mortgage liens, the remaining net proceeds go to co-owners per their ownership shares. The partition statute clarifies this distribution in NMSA 1978 § 42-6-22. If a mortgage lien attached to a specific owner’s interest exceeds the sale proceeds allocable to that owner’s share, that owner may face a deficiency claim by the lender.
Co-owners can sometimes avoid a deficiency by buying out the mortgaged share or agreeing to adjust ownership interests before sale. They may also negotiate payoff arrangements with lenders to approve a sale and distribution plan.
It is wise to conduct a full title search before filing a partition petition. Early identification of liens and their priority helps parties estimate net proceeds and prepare for potential shortfalls.
Helpful Hints
- Order a title search to identify all recorded liens before starting a partition.
- Review mortgage payoff statements to estimate lien balances and avoid surprises.
- Discuss lien priority; earlier-recorded mortgages get paid first in a partition sale.
- Consider co-owner buyouts to prevent deficiency claims on a mortgaged share.
- Consult an attorney early to explore negotiation with lienholders and court procedures.
Disclaimer: This article is for informational purposes only and does not constitute legal advice.