Ohio: How Mortgage, Property Tax and Carrying Costs Affect Your Share of Sale Proceeds

Detailed Answer

This article explains how mortgage payments, property taxes, insurance, HOA fees, and other carrying costs affect the money each owner receives when real estate in Ohio is sold. The rules differ depending on the legal context: a divorce (equitable division of marital property), a partition or co‑ownership split, or a simple sale by co‑owners with a written agreement. This is an explanation of Ohio law to help you understand what to expect; it is not legal advice.

What happens at closing (common, routine deductions)

When a property sells, standard closing‑day items normally reduce the gross sale proceeds before owners divide the net proceeds. Typical deductions include:

• Mortgage payoff(s) — lenders are paid from sale proceeds to clear liens.
• Realtor commissions and closing costs (title, escrow, recording fees).
• Prorated property taxes and HOA dues calculated to the closing date.

Because these items are routinely paid at closing, each owner’s share normally reflects the net remaining after these standard deductions.

What about carrying costs paid by one owner before sale?

If one owner advanced money for mortgage payments, property taxes, insurance, repairs, or other carrying costs before the sale, whether that owner can get reimbursed from sale proceeds depends on the situation:

• Divorce (marital property): Ohio courts divide marital property under Ohio Rev. Code § 3105.171. The statute gives courts broad authority to make an equitable division and to consider reimbursements for separate property contributions that were used to acquire, improve, or preserve marital property. That means a spouse who can prove they used separate (non‑marital) funds to pay carrying costs or the mortgage may ask the court for a reimbursement credit. The court will look for reliable tracing and documentation and consider the statutory factors when deciding whether and how much to award. See Ohio Rev. Code § 3105.171: https://codes.ohio.gov/ohio-revised-code/section-3105.171.
• Partition or co‑owners (nonmarital): When co‑owners cannot agree, one may file a partition action. Ohio’s partition statutes (see Chapter 5307) let a court order a sale and can allocate the proceeds after accounting for contributions by each co‑owner. Courts commonly allow credits for necessary expenses paid to preserve the property (taxes, mortgage to avoid foreclosure, reasonable repairs). Whether an owner who paid carrying costs gets a dollar‑for‑dollar credit depends on the facts and proof. See Ohio Rev. Code chapter 5307: https://codes.ohio.gov/ohio-revised-code/chapter/5307.
• Contractual agreement among owners: If co‑owners signed a written agreement (co‑ownership agreement, partnership agreement, or an agreement in a divorce settlement), that contract controls. A written agreement can state how carrying costs are shared and whether advances get repaid at sale.

Key legal and practical points

• Mortgage lenders have priority. A mortgage lien must be paid off at or before closing. You cannot bypass the lender’s lien by agreeing among owners to distribute gross proceeds.
• Prorations and routine closing charges usually come off the top. Buyers and sellers expect prorated property taxes, HOA dues, and some prepaid items to be adjusted at closing.
• Reimbursement claims require tracing and documentation. Courts and opposing owners will want bank records, canceled checks, escrow statements, invoices, and other proof showing who paid what and when.
• Separate vs. marital funds matter in divorce. Payments made from a spouse’s separate funds are more likely to support a reimbursement claim than payments made from marital income or joint accounts.
• Equity and “fairness” matter. Ohio courts apply an equitable (not strictly equal) approach. A court can award credits, adjust percentages, or make other orders to reach a fair result under the statute.

How to protect or pursue a reimbursement claim

1. Keep complete records now: mortgage statements, cancelled checks, bank/credit card statements, escrow payment histories, tax receipts, HOA invoices, and receipts for repairs or insurance.
2. Clearly identify the source of funds: separate bank accounts, inheritances, or gifts should be traced. Courts require tracing to treat funds as separate rather than marital.
3. Communicate in writing with co‑owners about expected credits or reimbursements and, if possible, reduce agreement to writing.
4. If you are divorcing, raise reimbursement and accounting issues early in pleadings and financial disclosures under Ohio law so the court can consider them under Ohio Rev. Code § 3105.171.
5. In partition suits, ask the court for an accounting of contributions and for credits for funds you advanced to preserve the property. Ohio’s partition statutes guide the court’s authority. See https://codes.ohio.gov/ohio-revised-code/chapter/5307.
6. Consult an attorney experienced in Ohio property, co‑ownership, or family law. An attorney can calculate claimed credits, prepare evidence, and represent reimbursement requests to a court or mediator.

Three common hypotheticals and likely outcomes

1) Married spouses sell the family home during divorce. One spouse used separate savings for the down payment years earlier and later paid taxes and some mortgage payments from separate bank accounts. Outcome: The court may award that spouse a reimbursement credit for the separate down payment and possibly for carrying costs if the spouse properly traced the funds and the court finds reimbursement equitable under Ohio Rev. Code § 3105.171.

2) Two siblings own a rental property as tenants in common. One sibling pays the mortgage and taxes for several years to keep the property from foreclosing. They later agree to sell. Outcome: At sale or in a partition action, the paying sibling may be entitled to reimbursement or an equitable adjustment for necessary preservation payments, especially if the other sibling derived benefit and did not contribute.

3) Co‑owners have a written agreement saying losses and carrying costs are shared equally. One owner advanced extra payments but the other owner refused to pay. Outcome: The written contract controls. The advancing owner can enforce the contract terms and seek repayment or a lien consistent with the agreement.

Helpful Hints

• Document everything. The stronger your proof of payments and the source of funds, the better your chance at reimbursement.
• Keep mortgage and escrow statements showing payments and who paid them.
• Ask for an accounting early in divorce or partition proceedings.
• Understand the difference between costs that are paid at closing (mortgage payoff, commissions, prorations) and costs you paid earlier and hope to recover.
• If you claim separate‑property reimbursement in a divorce, be prepared to show tracing and timing of funds under Ohio Rev. Code § 3105.171: https://codes.ohio.gov/ohio-revised-code/section-3105.171.
• In partition cases, review Ohio’s partition statutes: https://codes.ohio.gov/ohio-revised-code/chapter/5307. A judge can adjust shares to account for contributions to preservation.
• Consider tax consequences. Reimbursements and allocation of sale proceeds may affect capital gains and other taxes — consult a tax professional.
• Negotiate when possible. A clear written settlement between owners avoids litigation costs and uncertain court outcomes.

Disclaimer: This article explains general principles of Ohio law and is educational only. It is not legal advice, does not create an attorney‑client relationship, and does not cover all facts or legal issues that may apply to your situation. For advice about your exact situation, consult a licensed Ohio attorney.