Disclaimer: This article provides general information and does not constitute legal advice. Consult an attorney for advice about your situation.
Detailed Answer
When co-owners of real estate seek partition under Ohio law, Ohio Rev. Code § 5307.21 directs how the court handles existing mortgage obligations at sale and distribution. A partition action divides or sells property held by multiple owners. A partition sale converts the property to cash, and the court oversees the sale and distribution of proceeds.
Under Ohio Rev. Code § 5307.21, before distributing proceeds, the court must apply sale proceeds to: (1) costs of sale and preservation; (2) satisfaction of recorded mortgages; (3) payment of other liens and encumbrances; and (4) distribution of any remaining balance to co-owners in proportion to their ownership shares. Mortgages survive the partition action and retain priority over co-owners’ interests.
For example, if Alice and Bob co-own a property with a $50,000 mortgage and the court orders a partition sale for $200,000, the court will first deduct $10,000 in costs, then apply $50,000 to satisfy the mortgage. The remaining $140,000 is divided: Alice (60% share) receives $84,000, and Bob (40% share) receives $56,000.
If a mortgageholder fails to appear in the partition action, the court still enforces the lien. The purchaser at the partition sale takes title subject to any unpaid mortgage balance. Co-owners remain liable for any deficiency if sale proceeds do not fully satisfy the lien.
To protect their rights, co-owners should provide notice to mortgagees and review title reports before sale. Mortgagees may choose to redeem or enforce the lien in a separate foreclosure action.
Helpful Hints
- Review the title report and lien priority before a partition sale.
- Notify all mortgagees of the partition action in writing.
- Understand that mortgages survive partition and must be paid out of sale proceeds.
- Consider refinancing or a buyout if one co-owner wants to keep the property.
- Consult an attorney to address potential deficiency judgments.