How Do Existing Mortgage Obligations Affect Partition Sale and Proceeds Division in VA? | Virginia Partition Actions | FastCounsel
VA Virginia

How Do Existing Mortgage Obligations Affect Partition Sale and Proceeds Division in VA?

Detailed Answer

In Virginia partition actions, mortgage obligations remain secured by the property. When co-owners cannot agree on dividing real estate, one may file a court-ordered partition under Virginia Code §§ 8.01-92 to 8.01-110. If the court finds in favor of partition by sale, it orders a public auction. The sale proceeds must first satisfy all liens—including existing mortgages—before distributing any surplus to co-owners.

1. Survival of Mortgage Liens

Virginia Code § 8.01-96 makes clear that liens on the land are not cut off by partition. Instead, they attach to the proceeds of sale. See Va. Code Ann. § 8.01-96.

2. Priority and Payment Sequence

The court clerk or commissioner overseeing the sale must apply the proceeds in this order:

  • Costs of sale (advertising, auctioneer or commissioner fees).
  • Senior mortgage liens, paid in order of recordation.
  • Junior mortgages and other recorded encumbrances.
  • Any remaining balance is divided among co-owners according to their ownership interests.

Virginia follows a “first in time, first in right” rule for recorded liens. See Va. Code Ann. § 55-55 for lien priority.

3. Hypothetical Example

Suppose Alice and Bob co-own a parcel subject to a $200,000 mortgage recorded in 2020 and a $50,000 second mortgage recorded in 2021. They pursue a partition by sale and the court sells the property for $300,000. After $5,000 in sale costs, the court pays the 2020 lender $200,000, then the 2021 lender $50,000. The remaining $45,000 distributes to Alice and Bob based on their shares (e.g., 50/50 yields $22,500 each).

Key Point: Mortgage liens survive partition and must be paid from sale proceeds before owners receive any funds.

Disclaimer: This article is for informational purposes only and does not constitute legal advice.

Helpful Hints

  • Obtain a comprehensive title search to identify all recorded liens before filing for partition.
  • Request up-to-date payoff statements from each mortgage lender.
  • Evaluate whether an in-kind partition (dividing land into parcels) is feasible to avoid sale costs.
  • Consider negotiating a private buyout to handle lien payments outside of court.
  • Consult a qualified attorney to review complex lien priorities or multiple encumbrances.

The information on this site is for general informational purposes only, may be outdated, and is not legal advice; do not rely on it without consulting your own attorney.