Disclaimer: This article provides general information under Alaska law and does not constitute legal advice.
Detailed Answer
Partition Sale and Mortgage Liens
Under Alaska Stat. AS 09.45.020, a court may order a sale when dividing real property in kind proves impractical. Existing mortgages remain encumbrances on title. The court requires payment of all secured obligations from sale proceeds before distributing any funds to co-owners.
Priority of Mortgage Liens
Alaska Stat. AS 34.20.060 establishes that recorded mortgage liens rank by filing date. Senior liens receive payment first. Junior liens absorb surplus only after seniors are paid in full. The partition decree directs the escrow agent or custodian to apply funds according to these priorities.
Calculating Net Proceeds After Mortgage Payoff
After satisfying mortgage liens and deducting court-approved sale costs (advertising, brokerage fees, taxes), the remaining balance constitutes net proceeds. Under Alaska Stat. AS 09.45.060, the court allocates net proceeds to co-owners in proportion to their ownership interests unless co-owners agree otherwise.
Example Scenario
Two cousins own a vacation home, each holding a 50% share. A first mortgage of $200,000 encumbers the property. The court orders a partition sale at $500,000. Sale costs total $15,000. The escrow agent pays the $200,000 mortgage, leaving $285,000 for distribution. Each cousin receives $142,500 based on their equal ownership share.
Helpful Hints
- Obtain lien payoff statements from each mortgage lender early in the process.
- Ask the court clerk for an estimate of sale-related costs to avoid surprises.
- Review title records to identify any junior liens or judgments.
- Consider negotiating a buyout if co-owners wish to avoid a forced sale.
- Consult a real estate attorney for complex lien structures or multiple encumbrances.