Detailed answer — how Florida law treats mortgages, property taxes, and carrying costs when a property is sold
Short answer: In Florida the mortgage and other liens on the property are normally paid out of the sale proceeds before owners split the net proceeds. Property taxes and other carrying costs are typically prorated at closing, and claims for reimbursement of extra carrying costs (mortgage payments, insurance, HOA dues, repairs, utilities) depend on the parties’ agreement or a court’s decision (for example in a divorce or partition). Keep clear records and raise any reimbursement claim before or at closing or in court.
Why mortgage and lien holders get paid first
A mortgage is a lien on the real property. When you sell, the title company or closing agent will pay off outstanding liens (mortgages, tax liens, recorded judgments) from the gross sale proceeds to produce the net proceeds that owners divide. This is standard practice and reflects lien priority — a creditor with a recorded mortgage is entitled to payment from sale proceeds. See Florida law on recording and mortgages for background: Florida Statutes, Mortgages (Ch. 697).
Prorations at closing — property taxes, HOA fees, utilities
Most closings in Florida use a prorations worksheet: property taxes, common-area or HOA assessments, and often prepaid homeowner association fees, are prorated between buyer and seller based on the closing date. If you paid property taxes or HOA fees that cover part of the period after sale, the buyer will typically reimburse you at closing (or you will reimburse the buyer if tax period extends past your ownership). Florida’s tax statutes explain that property tax liens attach to property and are handled in the tax sale and collection statutes: Florida Statutes, Tax Collections & Liens (Ch. 197).
What about mortgage payments and other carrying costs you personally paid?
There are three common situations:
- Single owner selling alone: You paid the mortgage and other carrying costs out of your pocket while you owned the home. The mortgage balance is paid at closing from sale proceeds, and any excess (your equity) belongs to you.
- Co-owners selling together (not divorce): The closing statement usually pays off liens first, then divides net proceeds according to the ownership agreement. If one co-owner paid more than their share of mortgage payments, taxes, insurance, or repairs, that co-owner can request a credit at closing or a negotiated reimbursement if the co-owners made a prior agreement. Absent an agreement, resolving disputed credits may require a civil action (for example, accounting or partition) where a court can order adjustments based on equitable principles.
- Sale as part of a divorce (dissolution of marriage): Florida courts divide marital assets and liabilities under Chapter 61 of the Florida Statutes. A court may award reimbursement or adjust the property division if one spouse paid mortgage or carrying costs using separate funds or for other equitable reasons. See the statutes governing dissolution for more: Florida Statutes, Dissolution of Marriage (Ch. 61).
How courts or closing agents calculate credits or reimbursements
Practical points you should know:
- Mortgage payoff: The lender provides a payoff figure that is paid from sale proceeds. The seller’s equity equals sale price minus mortgage payoff, closing costs, prorations, and other valid liens.
- Tax proration: Property taxes are prorated so each party pays the tax for the portion of time they owned the property during the tax year.
- Extra carrying costs: If one owner paid more than an agreed share of mortgage, insurance, HOA dues, or necessary repairs, they can seek reimbursement. If the other owner agrees, the closing can reflect a credit. If not, the party seeking reimbursement should present records and may need to file a court claim (partition, accounting, or claim within a dissolution case) to obtain an adjustment.
- Repairs and improvements: Distinguish between maintenance (often reimbursable) and capital improvements (may increase sale price but are treated differently in accounting and court allocation).
Practical example (hypothetical)
Two co-owners A and B own a house equally. Sale price: $300,000. Mortgage payoff: $140,000. Closing costs and realtor fees: $24,000. Net after liens and closing costs: $136,000. If A paid $6,000 more than B in mortgage and insurance over the last year and the parties agree, the closing can credit A that $6,000 before dividing the remainder, or they can split net proceeds 50/50 and A can seek reimbursement later. If they can’t agree, a court might order an accounting and adjust shares based on contributions and fairness.
Steps to protect your claim for reimbursement
- Keep detailed records — cancelled checks, bank statements, mortgage statements, HOA receipts, insurance invoices, and receipts for repairs.
- Communicate and document any agreement with co-owners in writing (signed settlement agreement or closing instructions).
- Request credits early — before closing — so the escrow/closing agent can reflect them on the settlement statement.
- If you anticipate a dispute, consult a Florida real estate attorney promptly; if necessary, consider filing for partition or pursuing an accounting in court.
When to get legal help
Talk to a Florida real estate or family-law attorney if:
- Co-owners disagree about reimbursements or credit at closing.
- You’re in a divorce and property division is contested.
- You suspect recorded liens or tax liens that will affect distribution of proceeds.
- You lack documentation for major payments you claim as credits.
For background statutes, see the Florida statutes on mortgages and liens and on dissolution of marriage: Mortgages (Ch. 697), Tax Collections & Liens (Ch. 197), and Dissolution of Marriage (Ch. 61).
Disclaimer
This article is for general informational purposes only and is not legal advice. It does not create an attorney-client relationship. For advice about your specific situation, consult a licensed Florida attorney.
Helpful Hints — practical checklist for sellers and co-owners in Florida
- Obtain the lender’s exact payoff demand before listing or negotiating sale terms.
- Ask the closing agent for a draft HUD/Closing Disclosure early enough to spot proration and credit issues.
- Keep invoices and proof of mortgage, tax, insurance, HOA, and repair payments organized by date and purpose.
- Get any co-owner agreement about credits or reimbursements in writing and attach it to closing instructions.
- If you’re in a divorce, raise property-credit issues with your attorney early — equitable distribution can be complex.
- If you suspect a hidden lien or tax issue, run a title search and clear clouds on title before closing.
- When in doubt, get a short consultation with a Florida real estate attorney — a small spend now can prevent a larger dispute later.