Detailed Answer
When co-owners petition an Arizona court for a partition sale under A.R.S. § 12-1301 et seq., any existing mortgage liens on the property remain attached to the estate. The court orders a public sale, and the proceeds first satisfy outstanding encumbrances before distributing the balance among the co-owners.
Statutory Framework
Arizona’s partition statutes appear at A.R.S. § 12-1301 through § 12-1315. Section 12-1309 requires the court to join mortgagees and lienholders so sale proceeds can satisfy their claims. Section 12-1312 directs the priority of payment.
Priority of Mortgage Liens
Under Arizona’s recording statutes, liens attach in the order they record. See A.R.S. § 33-431. At sale, the senior mortgagee is paid first, followed by junior lienholders, including home-equity lines of credit. Any remaining balance becomes the net proceeds.
Process of Sale and Distribution
1. The court issues a decree of sale and appoints a commissioner.
2. The property sells at auction, typically free of liens.
3. Sale proceeds go into the court registry.
4. The court instructs the clerk to pay liens in priority order. Mortgage payoffs rely on the lender’s payoff statement (A.R.S. § 33-814).
Hypothetical Example
Two siblings own a rental home as tenants in common. They owe a $120,000 first mortgage and a $30,000 home-equity line. The court orders a partition sale for $200,000. From the proceeds, $120,000 pays the first mortgage, $30,000 satisfies the HELOC, leaving $50,000 net. If they share equally, each receives $25,000.
Disclaimer: This article is for informational purposes only and does not constitute legal advice. Consult a qualified attorney for guidance on your situation.
Helpful Hints
- Identify all recorded liens before filing a partition.
- Join mortgagees and lienholders early to avoid sale delays.
- Confirm lien payoffs with lenders before sale.
- Understand your ownership interest—unequal shares affect net distributions.
- Consider negotiating buyout or voluntary sale to control timing and price.