How do existing mortgage obligations affect the sale and division of proceeds in a partition in MO? | Missouri Partition Actions | FastCounsel
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How do existing mortgage obligations affect the sale and division of proceeds in a partition in MO?

Detailed Answer

When co-owners in Missouri cannot agree on dividing real property, one owner may file a partition action under RSMo § 512.250 et seq. Any existing mortgage on the property remains a valid lien and must be satisfied from the sale proceeds before distributing funds to the co-owners. Missouri law treats mortgages as encumbrances that “follow the land” into a partition sale fund.

Here’s how the process works:

  1. Court Orders Sale: Under RSMo § 512.260, the circuit court directs a public sale of the property. The sale brings in gross proceeds.
  2. Payment of Liens and Costs: From the gross proceeds, the court pays:
    • Sale expenses (commissions, advertising)
    • Property taxes and assessments
    • Mortgage liens in priority order (first-recorded mortgages first)
  3. Distribution of Net Proceeds: After satisfying liens and costs, the remaining balance—known as the net proceeds—goes to the co-owners. The court distributes it according to each owner’s legal share in the property as established in the petition or by agreement. See RSMo § 512.270.
  4. Deficiency Claims: If the sale proceeds are insufficient to cover the full mortgage balance, the mortgagee may seek a deficiency judgment against the debtor-owner for the unpaid balance, subject to Missouri’s deficiency statutes.

Hypothetical example: Two siblings each own 50% of a house. A mortgage of $100,000 is recorded. The court orders a sale, and the property fetches $150,000. After $5,000 in sale costs and $100,000 mortgage payoff, the net $45,000 is split equally, giving each sibling $22,500.

Disclaimer: This article is for informational purposes only and does not provide legal advice. Consult a qualified attorney to discuss how Missouri law applies to your specific situation.

Helpful Hints

  • Verify lien priority by checking the recording dates in the county recorder’s office.
  • Ask the court for an itemized accounting of sale costs and lien payoffs.
  • Consider whether co-owners want to bid jointly at sale to retain the property.
  • If you worry about a deficiency, discuss potential negotiations or bankruptcy options with counsel.
  • Keep up with property taxes to avoid senior tax liens that get paid before mortgages.

The information on this site is for general informational purposes only, may be outdated, and is not legal advice; do not rely on it without consulting your own attorney.