Posts Tagged ‘liens’

Businessman with Magnifying Glass

IT’S THE SMALL STUFF

I’m sure at some point in life, each of us has thrown up our hands and said, “I’m not worrying about the details, this is good enough.” Of course, when you deal with real property transactions, you quickly learn that the small stuff matters.

The claims team has seen several areas that can be typically resolved in the transaction or post-closing without ever rising to the level of a claim. Let’s look at three of those areas – Release of Liens, Release of Revolving Line of Credit / Home Equity Line of Credit, and Property Taxes which all require attention to detail.

  1. Release of Liens

Let’s say you’ve obtained the payoff letter from the correctly identified and verified lienor, closed the transaction, sent the funds to the lienor, and now you are moving on to the transaction. But wait! The lien is recorded in the county land records, so how are others to know it has been paid? Several lienors will handle recording a release in the proper county land records, but there are few lienors who fail to do so. Either the lienor sends an unrecorded release to their borrower, to the title company, or does not prepare one at all. In a few states, there are statutes that provide a timeframe in which a lienor must record the release after receipt of payment. In other cases, the instrument may have a clause that discusses the obligation of the lienor when the debt is paid. In all cases, as part of a post-closing, best practice process, a release or satisfaction should be promptly filed in the property’s county land records before the file is classified as completed. This may require a few follow-up communications with the lienor to satisfy this requirement, but it will be worth it in the long run.

  • Release of Revolving Line of Credit / Home Equity Line of Credit

The Revolving Line of Credit or Home Equity Line of Credit loans allow a borrower to draw funds, when needed, and the borrower can use the line of credit over and over while being secured with the property. Many closers may take the same steps as a typical payoff of a mortgage or deed of trust, but there are a few additional steps required to properly close down and have the loan released from the property. Just sending the payoff funds is not enough. 

To properly address these types of loans, a written request from the borrower to close the account upon receipt of the full payoff is typically required. Many lenders request a signed letter from the borrower requesting to close the account. So, if you are wiring the funds, the seller’s written request to close the account will still need to be delivered to the lender. To provide evidence that the borrower’s written request was sent to the lender, a best practice would be to track the delivery of the request to the lender, either by facsimile, mail or email. Once you receive confirmation that it has been delivered and received, keep a copy of this information in the file along with a copy of the written request. Similar to the Release of Lien section above, a release or satisfaction should be properly filed in the property’s county land records before the file is classified as completed.

  • Property Taxes

Whether you are using a tax company to provide a report on the outstanding property taxes or doing the research yourself, if not handled accurately, unpaid property taxes may result in a homeowner being subjected to additional taxes and penalties or losing the property. In a few states, just looking at the county’s tax collector site is not enough as there are other entities required to be paid that are situated outside of the tax collector’s office. If you are doing business in such a state, identify all the tax entities to which taxes are due and payable when a property is conveyed or refinanced.  

Another tax example involves states that are reviewing prior owner exemptions. If an exemption was deemed to have expired in an earlier conveyance, the tax collector’s office is sending letters to the current homeowner seeking payment for the difference caused by the changed exemption for the prior years. As an example, if there is a homestead exemption reflected but a company has held title to the property for several years, this may require a discussion with the tax collector’s office as to the proper calculation of taxes owed if the exemption is no longer valid. With this information, the proper amount of taxes can be collected at closing.

Our final tax example involves prior year’s unpaid taxes or issued tax certificates. In these cases, make certain the proper payment amount is collected and timely delivered to stop a tax lien sale or, if sold, any certificate holder from obtaining a tax deed. Depending on the state, the expiration of the redemption period after a tax deed is issued may result in a loss. As a best practice, the title company should confirm with the tax collector’s office or its designated entity that it has received payment and that the payment is being applied to the correct account(s).

Conclusion

Attending to the details in these three areas will provide assurance to all those involved in the transaction. Having properly addressed these matters, a seller or buyer will not have to worry about being contacted in a few months, or possibly years from now, to address these issues. If you have questions, please contact the Alliant National claims team.

tree house gavel

Recorded judgments in Arizona do not encumber homestead property, but watch out for a Lis Pendens

By Scott A. Malm

Many lawyers representing creditors record their money judgments and let escrow companies collect the judgment amount for them when the debtor sells real property.

But after a recent published opinion in Arizona applying its homestead protection laws, that practice may soon come to an end if the real property is protected by the homestead statutes.

In Pac. W. Bank v. Castleton, No. 1 CA-CV 17-0667, 2018 WL 6815531 (Ariz. Ct. App. Dec. 27, 2018), the Arizona Court of Appeals considered the effect of a $5.2 million recorded judgment on a subsequent conveyance of a personal residence by the judgment debtor to a third-party buyer.

After the close of escrow, the judgment creditor sought to collect its judgment against the buyer by filing a judicial foreclosure complaint.

Such action triggered coverage under a title insurance policy (not an Alliant National policy!) because the judgment was not listed in Schedule B.

The Arizona Court of Appeals had to decide the purely legal question: Is a recorded judgment a lien that encumbers homestead property? If so, the insured would lose its property.

Florida Association Foreclosure, Part 2: The anatomy of a foreclosure by a homeowners or condominium association

In many respects an association foreclosure mirrors a bank foreclosure, with some minor differences.

Once an account is delinquent, the association is permitted under Florida Statutes to place a lien on the subject property for nonpayment of assessments.

Prior to recording this lien, the association is required to send the offending homeowner a Notice of Intent to Lien and to provide a period of time with which to bring the account current (30 days for a condominium association, 45 days for a homeowners’ association).

If the account is not brought current during this time period, the association is permitted to record its lien and institute a foreclosure action in the subject property and against the offending homeowner.

Prior to filing the lawsuit, however, the association is required to offer the offending homeowner one last chance to bring the account current.

Florida Association Foreclosure, Part 1: Understanding the terms of your purchase into a homeowners or condominium association

Because of Florida’s boom in development during the 1990s and early 2000s, many properties are included in planned unit developments, more commonly known as homeowners’ and condominium associations.

If a property is located within one of these developments, activities conducted on and uses of the particular property are governed by the association charged with overseeing the day-to-day operations of the development.

Although we tend only to notice the activities of the association as they relate to aesthetic matters (landscaping, trash disposal, pool maintenance, etc.), much of the association’s duties relate to community finances and enforcement of the association’s governing documents.

While the legal principles involving associations is vast, this blog will focus on one small aspect of the association puzzle: association foreclosures for nonpayment of assessments.

Missouri: Practical, useful benefits of correction deeds

Once a deed is recorded, it becomes part of the public record and cannot be changed. However, sometimes an error in the recorded deed is discovered by one of the parties.

Typical errors include misspelled or incomplete names, omission of a party’s marital status, or an incorrect or incomplete legal description of the property which is the subject of the deed. In such cases, the Trenton K. Bond public record can be amended by recording a correction deed.

Let's Connect

Discover more stories and conversations on our social media networks,
or drop us a line on our contact page.


The Independent Underwriter for
the Independent AgentSM