Disclaimer: This information is for educational purposes only and does not constitute legal advice.
Detailed Answer
When co-owners of real property in Utah seek a partition by sale, any existing mortgages or deeds of trust on the property remain attached to the title. Under Utah Code §78B-6-507 (Distribution of Proceeds), the court orders a sale and directs the distribution of proceeds in three steps:
- Payment of Sale Costs: The officer handling the sale pays auction costs, advertising, and court fees first.
- Satisfaction of Liens and Mortgages: Proceeds then pay off recorded mortgages and liens in order of priority (usually by date of recording). A senior mortgage recorded first has priority over junior liens. If proceeds don’t cover all debt, lienholders may pursue deficiency judgments against borrowers.
- Distribution to Owners: After liens and costs, the remaining balance divides among co-owners according to their ownership interests or the court’s decree.
Key points under Utah law:
- Liens Survive Partition: A sale under §78B-6-507 does not extinguish mortgages. Buyers take title subject to recorded encumbrances.
- Priority by Recordation: Utah follows a “first in time, first in right” rule for mortgages. Always conduct a title search before sale.
- Deficiency Rights: If a mortgage balance exceeds sale proceeds, the lender can seek a deficiency judgment against the borrower co-owners, per Utah Code §57-1-33 (Deficiency Judgment).
Helpful Hints
- Run a Comprehensive Title Search: Identify all recorded mortgages, liens, and judgments before filing for partition.
- Understand Ownership Shares: Clarify each party’s percentage interest to forecast net proceeds accurately.
- Estimate Lien Payoffs: Request current payoff statements from mortgage holders to calculate expected distributions.
- Consider Negotiation: Co-owners may agree to refinance or buy out a mortgaged share to simplify sale.
- Consult an Attorney Early: A lawyer can help draft pleadings, compute lien priorities, and advocate your interests in court.