So DD's are acting for both daughter and ex? When you say Northern Rock handled the sale, do you mean they were repossessed or that they werei n difficulty and the lender assisted them in getting the property sold eg referred them to solicitors (I know Northern Rock are one of DD's biggest clients).
Have all other debts secured over the property been discharged along with any fees and charges so the �5k is all theirs?
Was no agreement made before the sale as to who was to get what part of the monies which were left over?
Did the solicitors know that they had separated and there may be a dispute over who gets what?
It is likely they are now facing a conflict of interests as they are acting for two clients who cannot agree. If they were jointly instructed they can't chose to take one client's advice over another's.
It may be that one of them would need to get independant legal advice so that an agreement can be made and the monies apportioned accordingly.
If no decision can be reached it may then be up to a court to decide which means further time and expense.
As regards the loan, what kind of loan, a normal personal loan? You say it was in his name but what was the loan used for, did it benefit them both, could the amount be apportioned accordingly?
How much is the loan, is the outstanding amount over the �5k surplus?
I would assume it's not secured over the property as it doesn't seem to have been paid off on the sale.