Disclaimer: This article is for educational purposes only and does not constitute legal advice. Consult a qualified attorney for guidance on your specific situation.
Detailed Answer
In South Carolina, when co-owners seek a partition by sale, any existing mortgage on the property remains a secured lien that must be addressed before dividing net proceeds among owners. The process follows the South Carolina Partition Act (Chapter 51 of Title 15) and general lien priority rules under Title 29.
1. Mortgage Liens and Priority
A mortgage recorded against real property creates a primary lien on the owner’s interest. Under SC Code §29-1-20 (https://www.scstatehouse.gov/code/t29c001.php?section=29-1-20), mortgages take priority by the order of recording. If multiple liens exist, the earliest recorded gains superior rights to sale proceeds.
2. Partition Sales Under South Carolina Law
South Carolina law allows a partition either in kind or by sale. When sale is more practical, a court orders a public auction or private sale under SC Code §15-51-10 (https://www.scstatehouse.gov/code/t15c051.php?section=15-51-10). The court appoints a commissioner to sell the property.
- Notice and Sale – The commissioner publishes notice, sets a sale date, and ensures a fair market process.
- Payment of Liens – At closing, sale proceeds first pay off mortgage liens in priority order. This includes first mortgages, subordinate mortgages, and any other recorded lien holders.
- Costs and Fees – After liens, the commissioner deducts sale costs, court fees, and reasonable commissioner’s fees.
- Distribution of Net Proceeds – The remaining balance divides among co-owners according to their ownership interests, unless the court has ordered a different division based on contribution or agreement.
3. Hypothetical Example
Suppose three siblings hold equal shares in a beach house in Charleston. A $300,000 first mortgage and a $50,000 second mortgage encumber the property. If the court orders a sale and it nets $400,000:
- $300,000 pays off the first mortgage holder.
- $50,000 pays off the second mortgage holder.
- Assume $10,000 covers sale expenses and fees, leaving $40,000 net.
- Each sibling receives $13,333.33 (one-third of $40,000).
Helpful Hints
- Review recorded mortgages and lien priority before filing for partition.
- Obtain a payoff statement from lenders to estimate lien amounts.
- Discuss potential court-appointed commissioner fees when budgeting sale costs.
- Consider negotiating a buyout among co-owners to avoid the time and costs of a partition sale.
- Consult a real estate attorney to confirm statutory requirements under South Carolina law.