Oregon: Recovering Mortgage, Property Tax, and Carrying Costs From Sale Proceeds | Oregon Partition Actions

Detailed Answer

When you sell real estate in Oregon, whether you can recover the mortgage payments, property taxes, insurance, repairs, and other carrying costs you paid before the sale depends on three main things:

Who holds title and the ownership shares.
Whether there is a written agreement (co‑owner agreement, prenuptial agreement, buy‑sell agreement, etc.).
Which legal process governs the split — a normal sale closing, a partition action between co‑owners, or property division in a dissolution (divorce) case.

Sale by co‑owners (unmarried owners, tenants in common, etc.)

At a typical real estate closing, the lender’s mortgage payoff and prorated property taxes are taken out of gross sale proceeds before owners get net proceeds. That is different from a separate reimbursement claim between co‑owners.

If two or more people own the property and one owner paid more than their fair share of the mortgage and carrying costs, that owner can try to recover the extra payments in one of these ways:

By enforcing an express agreement (if the owners had a written agreement specifying how costs and proceeds are shared).
By negotiation at closing — owners can agree to an internal accounting and adjust the split of net proceeds to reimburse the paying owner.
By filing a partition action in court. In Oregon, partition statutes govern how the court divides property or orders sale of property jointly owned. In a partition or related accounting the court can consider contributions and may award credits or adjust shares based on equitable principles. See Oregon statutes on partition actions: ORS Chapter 105 (Partition).

Sale in a divorce or dissolution (marital property)

In an Oregon dissolution, the trial court must divide the estate of the parties in a way that is just and equitable. The court may consider who paid mortgage and carrying costs when deciding contributions and reimbursements. The controlling statute for property division in dissolution is ORS 107.105. See: ORS Chapter 107 (property division provisions).

That means the court can order one spouse to be reimbursed for payments made from separate property, or shift the division to reflect disproportionate contributions, but it is not automatic — the court balances many factors and applies equitable principles.

Practical effect at the closing table

In practice, here is what normally happens at a sale closing:

The buyer’s funds are used to pay off mortgages and liens (lender payoff amounts). Those amounts are deducted from gross proceeds.
Property taxes are typically prorated at closing so the seller receives credit for taxes the buyer will pay, or the seller pays taxes up to the closing date. Escrow handles that proration automatically in most sales.
After liens, payoffs, closing costs, commissions, prorations and escrow charges are paid, the remaining net proceeds are distributed to the owners according to title ownership or the owners’ written agreement.

How a court or a title company treats “carrying costs”

Mortgage payoffs: The mortgage lender must be paid from sale proceeds if the debt is secured by the property. The lender’s payoff is not a discretionary credit an owner can claim as reimbursement — it is a lien payoff that comes off the top at closing.

Property taxes and assessments: These are usually prorated at closing; either the seller is charged its share or the buyer is credited. If co‑owners disagree about who should bear taxes, an internal accounting or lawsuit may be needed.

Insurance, utilities, repairs and other carrying costs: These are normally not paid by escrow automatically. If one co‑owner paid these costs, that owner can ask for reimbursement. If the other owners refuse, the paying owner may pursue an accounting or court action to recover unjust enrichment or a credit in a partition/dissolution proceeding.

Example (simple hypothetical)

Two unmarried co‑owners own a house 50/50. Owner A pays all mortgages and property taxes for two years while Owner B pays nothing. At sale, mortgage payoff of $100,000 is paid from gross proceeds and taxes are prorated through closing. Owner A asks for an additional credit of $12,000 (the mortgage and tax shortfall A covered). If there is no written agreement, A can:

Try to negotiate a credit at closing so the net proceeds split is adjusted (e.g., A receives a larger share).
File a partition or accounting action asking the court to give A a credit or to award A reimbursement for the extra payments.

The court will examine receipts, who benefited from the payments, and equitable principles before awarding a credit.

Key takeaways

Mortgage payoffs and lien payoffs are deducted from sale proceeds at closing — they are not a discretionary “credit” unless the owner is seeking extra reimbursement beyond legal payoffs.
Property taxes are usually prorated at closing and handled by escrow.
Other carrying costs (insurance, utilities, repairs) are not automatically reimbursed; recovery depends on agreement between owners or a court’s equitable accounting.
In Oregon dissolution cases, the court divides property equitably and may award reimbursements — see ORS Chapter 107 (property division).
For partition or disputes among co‑owners, see Oregon’s partition statutes: ORS Chapter 105 (Partition).

Disclaimer: This article explains general Oregon law and common practices. It is educational only and not legal advice. For advice specific to your situation, consult a licensed Oregon attorney.

Helpful Hints

Gather documentation: mortgage statements, payoff demands, tax bills, insurance receipts, repair invoices, bank records showing payments.
Check title and deed: determine exact ownership percentages and any written agreements that control how proceeds are split.
Ask escrow for closing figures early: escrow will show mortgage payoff amounts and tax prorations so you understand the initial deductions from gross proceeds.
Try negotiation or mediation first: co‑owners often reach a fair internal settlement without litigation if you present good records.
If you’re in a dissolution, raise reimbursement claims early with your attorney so the court can consider them under ORS 107.105: ORS Chapter 107.
If co‑owners cannot agree, consider a partition or accounting action under ORS Chapter 105: ORS Chapter 105.
Speak with an Oregon real estate or family law attorney if large sums are at stake — an attorney can advise strategy and represent you in negotiations or court.