Judgement Liens in the Chain of Title: They CAN be Resolved!
If a title search uncovers a judgment lien filed against the seller of a property, the title problem won’t necessarily scuttle the transaction. It is true that the lien cannot be ignored; it must be released by the creditor in order to close the transaction. The release isn’t automatic, but Texas law does provide two helpful strategies for sellers to effectively secure the release and close the deal.
In previous Title Tuesday's, we have addressed the often misunderstood issue of whether homesteads are affected by judgment liens filed against a homeowner, and why title companies require the judgment lien to be released before closing and insuring the transaction. If such a release is mandated in a transaction involving your client, he or she has a couple of alternatives for dealing with the issue. First, your client can retain the services of an attorney to send a demand letter to the judgment creditor, demanding that they issue a partial release of lien as to this homestead, and pointing out that, under the court ruling in Tarrant Bank v. Miller (citation omitted), the creditor could be liable for triple damages if they fail to comply. More often than not, this type of communication gets the creditor’s attention, and the release is eventually signed. However, depending on the age of the lien, and the size of the creditor, there is no assurance that the matter will be resolved as expeditiously as the parties would like.
The second course of action, which could be undertaken simultaneously, is for the attorney to prepare and send an affidavit under Sec. 51.0012 of the Texas Property Code. This statute provides a mechanism for the automatic release of a judgment lien on homestead if the creditor does not contradict the facts of the affidavit within 30 days of receipt.
Of course, there is no guarantee that the creditor won’t object/contradict under either of these initiatives, it is very important that the seller not move out of the house before receiving the release, but more often than not, the issue is satisfactorily resolved.
This Title Tuesday Tip is provided courtesy of Rattikin & Rattikin, LLP, attorneys and counsel for Rattikin Title Company and is not a legal representation or statement of law. Please confer with your legal counsel for any and all legal questions.