Partition Sales in California: Impact of Mortgages on Proceeds
Detailed Answer
In California partition actions, co-owners can request a sale of jointly owned property under California Code of Civil Procedure § 872.610. When the court orders a sale, all existing mortgages and liens remain attached and must be paid from sale proceeds before distribution. The priority typically follows:
- Sale costs and court fees.
- First mortgage liens.
- Junior liens (e.g., second mortgages, judgment liens).
- Remaining balance distributed among co-owners according to ownership interests.
For example, Alice and Bob each own 50% of a property. Alice has a first mortgage with a balance of $200,000. After a court-ordered sale for $500,000 and $20,000 in sale costs, $480,000 remains. The mortgage is paid $200,000, leaving $280,000. Each co-owner receives $140,000.
If the sale price is insufficient to satisfy the mortgage, the mortgagee may credit-bid at auction to protect its interest. Any resulting deficiency may be pursued through a separate foreclosure or deficiency action under California Civil Code § 580d.
Distribution of proceeds follows California Code of Civil Procedure § 873.020. All lienholders must be served notice and can assert their claims before final distribution.
Helpful Hints
- Obtain a current title report to identify all encumbrances.
- Verify mortgage balances and lien priorities before sale.
- Serve notice on all secured and unsecured lienholders.
- Consider a buyout agreement to avoid public auction delays.
- Consult legal counsel on credit bids and deficiency rights.
Disclaimer: This article is for informational purposes only and does not constitute legal advice.