Do you need documentation from a co-owner before proceeds from a real property sale are split?

Short answer: Under Texas law, you cannot unilaterally withhold sale proceeds from a co-owner simply because they haven’t produced mortgage payoff statements or repair receipts. However, you can and should demand those documents, and you can use court processes (including a partition action and requests for an accounting) or escrow conditions to ensure liens, mortgages, and legitimate repair expenses are identified and credited before distribution.

Detailed answer — How this works in Texas

Start with the basics. When two or more people own real property together, each owner holds a share (commonly tenants in common). If the property is sold or otherwise partitioned, sale proceeds are distributed after paying liens, mortgages, taxes, and court-ordered adjustments. Texas law provides a statutory process for partition of real property and for distribution of sale proceeds. See Texas Property Code, Chapter 23: Partition of Real Property: https://statutes.capitol.texas.gov/Docs/PR/htm/PR.23.htm.

Key points you need to understand:

Liens and mortgages are satisfied before dividing proceeds. A recorded mortgage (or deed of trust) is a lien on the property. At sale, the payoff to the lender is normally taken out of the sale proceeds at closing. If a co-owner claims a mortgage exists or that they personally paid the mortgage, the lender’s payoff statement — not just a co-owner’s word — determines the amount required to clear the lien.
Repair and improvement claims require proof. If a co-owner claims they paid for repairs or improvements and wants reimbursement or credit against proceeds, they must prove those expenditures (receipts, cancelled checks, invoices) and show the expenses were reasonable and either necessary or increased the property’s value.
You can request documentation and use discovery in court. If you start a partition action or other lawsuit related to the property, you can compel the co-owner to produce mortgage payoff statements, lender communications, and receipts through discovery and requests for accounting.
Practical alternatives to court. If the co-owners agree to sell cooperatively, you can require the title company or escrow agent to withhold funds until valid payoff statements and agreed reimbursements are provided. You can also require written releases or closing adjustments in the settlement statement.
Unilateral withholding of proceeds is risky. If you keep money from a co-owner without either their agreement or a court order, you expose yourself to claims for conversion, interest, attorney’s fees, and other legal consequences. Let a court or escrow agent handle contested distributions.

How a Texas partition or accounting works in practice

When co-owners cannot agree, a partition action under Texas law asks the court to order sale and distribution of proceeds, or to divide the property if feasible. The court will ensure valid liens are paid and may order an accounting between co-owners for advances, mortgage payments, repairs, taxes, and rents. The court evaluates documentary evidence (payoff statements, repair receipts, cancelled checks) when allocating credits or debts.

Reference: Texas Property Code, Chapter 23 (Partition), explains the statutory procedure courts use in partition actions: https://statutes.capitol.texas.gov/Docs/PR/htm/PR.23.htm.

Practical steps you can take now

Ask in writing. Send a written demand to the co-owner requesting mortgage payoff statements, lender communications, and receipts for repairs. Keep records of your request and their response.
Request the lender payoff. If a mortgage exists, the lender’s payoff statement is the controlling document for the amount owed. Ask the co-owner for the payoff or ask the title company to obtain it at closing.
Use escrow and closing instructions. Work with the buyer’s title company or an escrow agent to require documentation and withhold funds for verified debts and agreed reimbursements.
File a partition or accounting suit if needed. If the co-owner refuses to cooperate, a partition action can force sale and require an accounting of advances, repairs, and liens before distribution.
Preserve evidence. Save invoices, photos, contracts, canceled checks, and communications that show repairs or payments. That proof matters in court or settlement discussions.
Consider mediation. A neutral mediator can help negotiate credits for repairs or mortgage payments without the cost and delay of litigation.

When receipts and statements will change the distribution

Documentation matters most when one co-owner has:

Paid mortgage payments that prevented foreclosure, or paid off a mortgage.
Made substantial repairs or improvements and seeks reimbursement or a credit for the increased value.
Paid taxes, insurance, or other property-related expenses that should be apportioned among owners.

Courts will credit legitimate, provable expenditures and require repayment or adjustment of proceeds accordingly.

Helpful Hints

Always get lender payoff statements directly from the lender when possible; these are authoritative for closing.
Insist on itemized receipts, canceled checks, invoices, or bank statements to prove repair payments.
Keep all communications in writing and document requests for records and any refusals.
Use an escrow agent or title company to manage funds rather than handling proceeds yourself.
If you anticipate disputes, consult a lawyer experienced in Texas real property and partition actions early to preserve rights and avoid missteps.
Remember that informal agreements to withhold or divide proceeds can be binding if reduced to a written, signed settlement agreement.

When to get legal help

If the co-owner refuses to produce required documents, makes conflicting claims, or you are unsure how to handle payoff/lien issues at closing, talk with a Texas real property attorney. An attorney can help you prepare a discovery plan, file a partition action or accounting claim, draft closing instructions, or negotiate an escrow arrangement.

Important disclaimer: This article explains general legal concepts under Texas law to help you understand common options. It is not legal advice, and it does not create an attorney-client relationship. For advice about your specific situation, consult a qualified Texas attorney.