Detailed Answer
Under South Dakota law, co-owners may seek a partition sale when dividing real property. South Dakota Codified Laws (SDCL) Title 21, Chapter 47 governs partition actions. When the court orders a sale, any existing mortgages or liens must be satisfied before distributing the net proceeds to co-owners.
Court-ordered sales proceed per SDCL § 21-47-7 (Partition by sale). At the sale, the sheriff or court appoints a clerk to collect funds. The clerk pays the costs of sale and any court-ordered expenses first. Next, the clerk applies the sale proceeds to satisfy recorded encumbrances—mortgages, judgments, and tax liens—in order of priority. Mortgages hold priority based on their recording date under South Dakota’s race-notice recording system (SDCL § 43-27-6). The clerk discharges each mortgage lien by paying the lender the amount due at the time of sale, including interest and costs.
After satisfying all liens, the clerk calculates the remaining balance. Under SDCL § 21-47-18 (Disposition of proceeds), the court divides the surplus among co-owners according to their ownership interest. If co-owners hold unequal shares—determined by contribution to purchase price, title language, or court decree—the clerk distributes net proceeds proportionally. In some cases, a junior lienholder who fails to file a timely claim in the partition action may forfeit rights to proceeds, even if the lien remains on title.
Parties may also agree to buy out a co-owner instead of a public sale. The court reviews any agreement to ensure fairness. Co-owners often negotiate with mortgage lenders to obtain payoff quotes before sale to minimize post-sale litigation and ensure clear title for the purchaser.
Helpful Hints
- Obtain a title search early to identify mortgages, liens, and judgment debts.
- Confirm mortgage payoff amounts and obtain payoff statements in writing.
- Prioritize payment of property taxes and senior liens to avoid penalties or interest accrual.
- Consider alternative dispute resolution if co-owners disagree on sale terms.
- File all lien claims timely in the partition action to preserve rights to proceeds.
- Discuss with a real estate attorney or title professional to streamline the sale process.
Disclaimer: This article is for educational purposes and does not constitute legal advice.