Detailed Answer

When a court orders a partition sale of real property in Hawaii, the court supervises converting the property into cash and then distributing that cash among the co-owners. The basic distribution steps are:

1. Pay the costs of the litigation and sale first.

   The court pays costs and expenses from the sale proceeds. This usually includes court costs, attorneys’ fees awarded by the court, fees for the sale (real estate broker, escrow, closing costs), and costs of maintaining or preparing the property for sale (repairs, advertising, etc.).

2. Satisfy liens and encumbrances.

   Any valid liens that attach to the property—most commonly mortgages, tax liens, and recorded judgments—are paid from the sale proceeds in priority order. Lenders with recorded mortgages are typically paid off before any owner receives distribution. If the sale does not produce enough funds to satisfy all liens, the court will follow lien priority rules to allocate limited proceeds.

3. Make statutory or equitable adjustments.

   The court may adjust each co-owner’s share for specific equitable reasons. Common adjustments include:

   • Credit for payments a co-owner made toward the mortgage or taxes.
   • Credit for money a co-owner spent on improvements that increased value.
   • Debits for waste or for wrongful use of the property (e.g., damage caused by one co-owner).
   • Accounting for rents and profits: the court may require an accounting if one co-owner occupied the property or collected rents; then adjustments are made so co-owners receive fair shares.

   Those credits and charges are factual issues. The party claiming an adjustment should present records (receipts, cancelled checks, invoices, bank statements, title reports) to the court.

4. Divide the remaining net proceeds according to ownership interests.

   After paying costs, liens, and making any equitable adjustments, the remaining money is distributed to the co-owners according to their legal ownership shares. Ownership shares usually come from one of these sources:

   • The recorded deed language or written agreement (for example, “tenants in common” with specified percentages).
   • If the deed does not specify percentages, the court will try to determine each owner’s interest from evidence (contributions to purchase price, intent of parties, and other documents). If the parties are joint tenants without expressed unequal shares, the court often treats each as owning an equal share.

Example (hypothetical): three tenants in common own a parcel in 50% / 30% / 20% shares. The property sells for $500,000. After $30,000 in closing and sale costs and $200,000 mortgage payoff, net proceeds are $270,000. Each owner then receives their percentage of $270,000 (Owner A: $135,000; Owner B: $81,000; Owner C: $54,000), subject to any court-ordered credits or debits for contributions, improvements, rent or waste.

When the split can differ from deed percentages

Even when deed percentages exist, the court can order adjustments. Common reasons:

• A co-owner paid more than their share of the mortgage, taxes, or maintenance—court may award a credit.
• A co-owner improved the property at their expense—the court may reimburse or account for increased value.
• A co-owner wrongfully excluded others from possession or caused damage—court may give compensation to the harmed co-owner(s).

Relevant Hawaii law

Hawaii’s partition rules are set out in the Hawaii Revised Statutes (see Chapter 669, Partition). That chapter describes how partition actions work and the court’s powers in ordering partition by sale and handling sales proceeds. For the statutory text, see the Hawaii Legislature site: HRS Chapter 669 — Partition.

Note: mortgages and tax liens remain effective against the property until paid; a partition sale does not eliminate valid liens without paying them from the sale proceeds. For lien priorities and mortgage enforcement rules, consult relevant HRS provisions and an attorney.

Practical points about timing and supervision

The court usually supervises sale details (listing, contract approval, and closing) or appoints a commissioner to handle the sale. The court will hold funds in escrow or distribute funds at closing per its order. If disputes remain (for example, one party contests credits claimed by another), the court can retain funds until final resolution.

Helpful Hints

• Check the deed first: ownership shares usually come from the recorded deed or written agreements.
• Obtain a preliminary title report to identify mortgages, liens, and other encumbrances before sale.
• Keep detailed records of mortgage, tax, insurance, repair, and improvement payments. These records support credits in court.
• Consider mediation or a negotiated buyout before seeking a partition sale; a mutual sale or buyout can save costs and produce a better net result for all owners.
• Expect sale and legal costs to reduce net proceeds; factor commission, closing charges, and possible attorneys’ fees into expectations.
• If you occupy the property or collected rent, document dates and amounts. The court may require an accounting that affects distribution.
• Ask the court (or your lawyer) about escrowing sale proceeds if there are outstanding disputes about credits, liens, or ownership percentages.
• Consult a Hawaii-licensed attorney to review your situation early—papers, deadlines, and the factual record matter in court-ordered accounting.
• Be aware of tax consequences: capital gains, depreciation recapture, and allocation of tax basis among co-owners can affect after-tax proceeds; consult a tax professional.