Stories from the Trenches — Liens on Real Property
Today, attorney, Alex Munn, kicks off our series titled “Stories from the Trenches” a look at real problems we have seen over the years practicing law and the solutions employed. Over the years we have seen things from the mundane to the bizarre. These are some of those stories and how the issues were resolved.
As always, if you have any questions about your real estate, business, estate planning, or any other legal issue, please let us know by e-mailing me at kbdunnagan@bpelaw.com.
Also, remember that we do legal presentations for business and community organizations. If your group would like to schedule a presentation related to estate planning, please contact me to setup a date and time.
Stories from the Trenches — Liens on Real Property
By: Alexander W. Munn, Esq.
It’s a common scenario we see here daily at BPE Law Group: a client selling their home. A realtor lists the property, photos are taken, the house is staged, open houses held. Buyers then submit offers, and the purchase agreement is signed. All the hard work is finally going to payoff with a smooth and quick close.
As is routine, title runs a Preliminary Title Report, which, among other things, shows what liens are attached to the property. Escrow cannot close the transaction unless all liens are satisfied (paid). Normally, the only lien on a property is the loan/mortgage on the house. Title will request a payoff demand from the lender, and the purchase funds will be paid to the bank at the close of the transaction.
However, what happens if the Title Report shows liens that the seller wasn’t aware of? How can these liens be removed? It’s not as easy as you would think.
There are typically two types of liens: voluntary and involuntary. An example of a voluntary lien is a mortgage, where the borrower and lender agree that the lender can secure its loan to the collateral (the house) via a Deed of Trust. Involuntary liens can take many forms, but they normally are judgment liens, which attach to the property via an abstract. Examples of involuntary liens are:
Credit cards
Child support
City or County enforcement actions, including code enforcement fines
State or Federal tax liens
HOA assessment liens
What’s the easiest way to remove these liens? Simply put, contact the creditor and make payment. The creditor will then record a Satisfaction of Judgment with the County and the lien will be removed. But what happens if the creditor cannot be located? This scenario recently happened to a client of BPE Law Group.
A credit card issuer filed suit against the client for non-payment. A judgment was obtained, and an abstract of that judgment was recorded against the house. The law firm who obtained the judgment was out of business, so a payoff could not be obtained. The creditor was a partnership based in Toronto Canada, who had no record of the debt. The transaction could not close without removal of this lien.
Most judgments are valid for 10 years from the date the judgment was obtained, and, if renewed, are valid for an additional 10 years. In the credit card scenario, the judgment was entered on February 2, 2009. Critically, it was NOT renewed. Pursuant to Code of Civil Procedure section 683.020, liens are automatically extinguished after expiration of the 10-year period. So, we provided proof that the judgment was not renewed, and therefore expired, and title cleared the lien from the property and the transaction closed.
But what happens if the judgment has not expired, and the creditor cannot be located? Typically, a quiet title lawsuit must be filed to extinguish the lien. This process can take many months – time that both buyer and seller don’t have.
So – how to avoid these problems? If you are thinking of selling your home, obtain a preliminary title report early in the process. That way, you can deal with any unexpected liens before accepting an offer, and the transaction can close.
The attorneys of BPE Law Group, PC. have been advising our clients on real estate, business and estate planning issues for over 20 years and have assisted numerous clients in business and real estate matters and have represented and advised brokers on their professional obligations as well as consumers on their rights. If you have questions concerning legal matters, give us a call at (916) 966-2260 or e-mail Keith at kbdunnagan@bpelaw.com. Our flat fee consult for new clients may get you the answers you need for the questions you have.
The information presented in this Article is not to be taken as legal advice. Every person’s situation is different. If you are facing a legal issue of any kind, get competent legal advice in your State immediately so that you can determine your best options.
Today, attorney, Alex Munn, kicks off our series titled “Stories from the Trenches” a look at real problems we have seen over the years practicing law and the solutions employed. Over the years we have seen things from the mundane to the bizarre. These are some of those stories and how the issues were resolved.
As always, if you have any questions about your real estate, business, estate planning, or any other legal issue, please let us know by e-mailing me at kbdunnagan@bpelaw.com.
Also, remember that we do legal presentations for business and community organizations. If your group would like to schedule a presentation related to estate planning, please contact me to setup a date and time.
Stories from the Trenches — Liens on Real Property
By: Alexander W. Munn, Esq.
It’s a common scenario we see here daily at BPE Law Group: a client selling their home. A realtor lists the property, photos are taken, the house is staged, open houses held. Buyers then submit offers, and the purchase agreement is signed. All the hard work is finally going to payoff with a smooth and quick close.
As is routine, title runs a Preliminary Title Report, which, among other things, shows what liens are attached to the property. Escrow cannot close the transaction unless all liens are satisfied (paid). Normally, the only lien on a property is the loan/mortgage on the house. Title will request a payoff demand from the lender, and the purchase funds will be paid to the bank at the close of the transaction.
However, what happens if the Title Report shows liens that the seller wasn’t aware of? How can these liens be removed? It’s not as easy as you would think.
There are typically two types of liens: voluntary and involuntary. An example of a voluntary lien is a mortgage, where the borrower and lender agree that the lender can secure its loan to the collateral (the house) via a Deed of Trust. Involuntary liens can take many forms, but they normally are judgment liens, which attach to the property via an abstract. Examples of involuntary liens are:
Credit cards
Child support
City or County enforcement actions, including code enforcement fines
State or Federal tax liens
HOA assessment liens
What’s the easiest way to remove these liens? Simply put, contact the creditor and make payment. The creditor will then record a Satisfaction of Judgment with the County and the lien will be removed. But what happens if the creditor cannot be located? This scenario recently happened to a client of BPE Law Group.
A credit card issuer filed suit against the client for non-payment. A judgment was obtained, and an abstract of that judgment was recorded against the house. The law firm who obtained the judgment was out of business, so a payoff could not be obtained. The creditor was a partnership based in Toronto Canada, who had no record of the debt. The transaction could not close without removal of this lien.
Most judgments are valid for 10 years from the date the judgment was obtained, and, if renewed, are valid for an additional 10 years. In the credit card scenario, the judgment was entered on February 2, 2009. Critically, it was NOT renewed. Pursuant to Code of Civil Procedure section 683.020, liens are automatically extinguished after expiration of the 10-year period. So, we provided proof that the judgment was not renewed, and therefore expired, and title cleared the lien from the property and the transaction closed.
But what happens if the judgment has not expired, and the creditor cannot be located? Typically, a quiet title lawsuit must be filed to extinguish the lien. This process can take many months – time that both buyer and seller don’t have.
So – how to avoid these problems? If you are thinking of selling your home, obtain a preliminary title report early in the process. That way, you can deal with any unexpected liens before accepting an offer, and the transaction can close.
The attorneys of BPE Law Group, PC. have been advising our clients on real estate, business and estate planning issues for over 20 years and have assisted numerous clients in business and real estate matters and have represented and advised brokers on their professional obligations as well as consumers on their rights. If you have questions concerning legal matters, give us a call at (916) 966-2260 or e-mail Keith at kbdunnagan@bpelaw.com. Our flat fee consult for new clients may get you the answers you need for the questions you have.
The information presented in this Article is not to be taken as legal advice. Every person’s situation is different. If you are facing a legal issue of any kind, get competent legal advice in your State immediately so that you can determine your best options.