Default On Divided Property
When a tract of land is purchased with a mortgage and then split up and sold, the "inverse order of alienation rule" applies to decide parties liable for the unpaid debt.
When a mortgaged tract of land is split up and sold, upon default, the mortgagee first forecloses on lands still owned by the mortgagor and proceeds against other owners in an 'inverse order' in which they were sold. For example, Alice acquires a 3-acre (12,000 m2) lot by mortgage then splits up the lot into three 1-acre (4,000 m2) lots (X, Y, and Z), and sells lot Y to Bob, and then lot Z to Charlie, retaining lot X for herself. Upon default, the mortgagee proceeds against lot X first, the mortgagor. If foreclosure or repossession of lot X does not fully satisfy the debt, the mortgagee proceeds against lot Y (Bob), then lot Z (Charlie). The rationale is that the first purchaser should have more equity and subsequent purchasers receive a diluted share.
Read more about this topic: Mortgage Law
Famous quotes containing the words default, divided and/or property:
“In default of inexhaustible happiness, eternal suffering would at least give us a destiny. But we do not even have that consolation, and our worst agonies come to an end one day.”
—Albert Camus (1913–1960)
“The worker can unionize, go out on strike; mothers are divided from each other in homes, tied to their children by compassionate bonds; our wildcat strikes have most often taken the form of physical or mental breakdown.”
—Adrienne Rich (b. 1929)
“General education is the best preventive of the evils now most dreaded. In the civilized countries of the world, the question is how to distribute most generally and equally the property of the world. As a rule, where education is most general the distribution of property is most general.... As knowledge spreads, wealth spreads. To diffuse knowledge is to diffuse wealth. To give all an equal chance to acquire knowledge is the best and surest way to give all an equal chance to acquire property.”
—Rutherford Birchard Hayes (1822–1893)