Detailed Answer
In Montana, a partition action forces the sale or division of co-owned real property under the Montana Partition Act (Mont. Code Ann. § 70-21-101 et seq.). When the court orders a sale, it follows a set process to address existing mortgage liens. Mont. Code Ann. § 70-21-309 requires the court to pay sale costs first, then satisfy all recorded mortgages and other liens by priority, and finally distribute the net balance among co-owners based on their ownership interests. Mont. Code Ann. § 70-21-309.
Existing mortgages attach to the property and remain binding on any purchaser. The sale proceeds go to the court registry; the court uses them to pay mortgage holders in the order of recording date. If the sale generates sufficient funds, each mortgage is paid in full. If funds fall short, mortgages retain their lien for any unpaid balance, and the purchaser takes title subject to that lien. After satisfying liens, the court divides remaining proceeds among co-owners according to their shares.
For example, suppose owners A and B each hold a 50% interest. A mortgage of $100,000 is recorded before partition. A court-ordered sale yields $150,000. The court pays costs (e.g., $5,000), then pays the mortgage holder $100,000, leaving $45,000. A and B each receive $22,500.
Helpful Hints
- Review the property’s title report to identify all mortgages and their recording dates.
- Understand lien priority: earlier-recorded mortgages get paid first.
- Estimate sale costs and potential shortfalls to gauge net proceeds.
- Consider negotiating a buyout: one owner pays the mortgage and buys out others to avoid a public sale.
- Consult a real estate attorney to clarify rights and obligations under Mont. Code Ann. § 70-21-101 et seq.
Disclaimer: This article is for informational purposes only and does not constitute legal advice.