Detailed Answer
In North Dakota, when co-owners (cotenants) seek partition of real property under N.D. Cent. Code ch. 32-25, any existing mortgages or liens against the property must be addressed before splitting net proceeds. The key steps are:
- Title and lien determination. The court orders a title search to identify all mortgages and liens on the property. See N.D. Cent. Code § 32-25-02.
- Sale or allotment. If the court decides sale is the fairest way to divide, it orders a public sale. Any buyer takes the property subject to existing mortgages. See N.D. Cent. Code § 32-25-13.
- Mortgage payoff and lien satisfaction. At closing, the mortgage holder’s claim is paid first from the sale proceeds. Priority follows the order of recordation under N.D. Cent. Code ch. 32-19. For example, a first mortgage recorded in January 2020 is paid before a second mortgage recorded in June 2021. See N.D. Cent. Code § 32-19-23.
- Distribution of net proceeds. After satisfying all mortgages, liens, sale costs, and statutory fees, the court divides the remaining proceeds among cotenants according to their ownership interests. If one cotenant holds 60% of the property and another holds 40%, they share net proceeds in that proportion. See N.D. Cent. Code § 32-25-15.
- Redemption rights. A mortgagor or junior lienholder may have redemption rights. They can cure the default, pay off the senior mortgage, or bid at the partition sale to protect their interest. See N.D. Cent. Code § 32-19-27.
In summary, existing mortgages reduce the sale proceeds available for division. The court ensures mortgage holders are paid in priority order before distributing any balance among the cotenants.
Disclaimer: This article provides general information and does not constitute legal advice. Consult a qualified attorney for guidance on your specific situation.
Helpful Hints
- Obtain a full title report early to identify all encumbrances.
- Review mortgage priorities to predict payoff amounts.
- Consider negotiating a buyout among cotenants before court action.
- Factor in sale costs: broker fees, advertising, and court fees.
- Consult a real estate attorney to explore redemption or refinancing options.