I am not a lawyer, I am a judgment broker. This article is my opinion, and not legal advice, based on my experience in California. Laws vary in each state. If you ever need any legal advice or a strategy to use, please contact a lawyer.
Recording a judgment lien used to be the most popular and cost effective way to recover most judgments. Due to the economic mess, liens are not always as a reliable or as wise, of an investment as they used to be.
Recording a property lien can make you a secured creditor, and can get you paid if the judgment debtor’s property is sold or refinanced. A secured lien also gives you a chance (only a chance) to be paid something if the debtor files for bankruptcy protection. In California, and perhaps other states, if you record a lien before the judgment debtor buys a property, they do not get to take advantage of a homestead exemption.
Make sure to put some identifying information on the lien, e.g., part of the debtor’s SS number, etc. If the judgment debtor already owns property, list the Assessor’s Parcel Number (APN) of their property on the lien. This helps the title company can find your lien when they do their searches. It is very important to name the judgment debtor correctly. If the debtor owns property under an AKA name, amend the judgment to reflect that AKA before you record the lien or amend a previous lien with that AKA name matching the name owning the property.
There are many kinds of liens that generally can be classified as being one of two types; real estate liens, and non-real estate liens.
Depending on which state you are in, there are usually three kinds of liens used in the recovery of judgments: real estate liens, UCC liens, and liens created by having a judgment debtor personally served with a judgment debtor examination.
All regular judgment liens expire, however most can be renewed. Usually, real estate liens last as long as the underlying judgment. UCC liens last an average of five years, and debtor examination liens usually last one year.
In judgment recovery, the most popular type of liens are real estate liens. When the judgment debtor’s property is sold or refinanced, the judgment is sometimes partially or fully satisfied, in exchange for the creditor removing the lien.
In California, to record a real estate lien:
1) Fill out an Abstract Of Judgment form. You can get this form at the court or the court’s web site. Make two paper copies.
2) Bring or mail the two paper copies to the court. Pay the court, to have the court stamp and endorse the Abstract Of Judgment forms. They keep one copy, and give you the second copy. Make a copy of that, or the court can print an extra copy for you for a nominal fee.
3) Bring or mail two copies of the Abstract Of Judgment to the county recorder where the judgment debtor’s property is located. Pay the recorder to record your abstract of judgment, and pay them to mail a lien notice to the judgment debtor. The county recorder will keep one copy of the Abstract Of Judgment, and return their endorsed copy to you. County recorder policy varies by county and state, so always verify the details at the court or their web site.
UCC liens are usually recorded when the judgment debtor is a business. UCC liens are sometimes also recorded for non-business judgment debtors.
To record a UCC lien, download a UCC form from your Secretary Of State’s web site and fill it out. Writing the judgment information and case number, and a description of the judgment debtor’s assets on the UCC form, might make that lien stronger.
Mail the completed UCC form to the Secretary Of State with a check, and wait for them to mail a copy to you. Then, mail a copy of the endorsed UCC form to the judgment debtor.
In California, having a judgment debtor personally served with a judgment debtor exam, creates a lien on their personal property for one year. Writing a description of some of the judgment debtor’s personal property on the front or back of the judgment debtor examination forms and affidavits, may make this kind of lien stronger.
The most common way a judgment creditor may get paid by recording a real estate lien, is if or when the judgment debtor sells or refinances their property, because sometimes lenders and buyers require or arrange for prior recorded liens to get paid off.
Sometimes, even when you have recorded a property lien that identified the judgment debtor well, the title company misses your lien. In places like Florida, when this happens the judgment creditors often get burned. In other states, when the title company or lender misses your lien, you may have some recourse.
One idea that might work, is to not directly contact the title company, and fixing this is generally up to the new owner of the property. Your lien still encumbers the property and you are a lien holder. Look to see if the new owner took out a loan on the property, if so, write a letter to the mortgage company and tell then that you plan on foreclosing on the property and they can have what ever is left after you are paid. That will not make them very happy. They will contact the title company and tell them that they are about to sue them, which will make their check book suddenly appear and quickly write you a check to pay for their mistake.
If the new owner did not take out a loan, then you can consider a foreclosure action against the property. When you tell the new owner this, they generally call the title company and you will get results.
Another way to go, when a title company misses your lien, is to contact the new property owners. If they are innocent parties, encourage them strongly to contact their title guarantor. If that does not work, mail the title company and the new property owner a nicely worded letter, along with a copy of the previously recorded Abstract of judgment, by regular first class mail. If they do not respond within a week or so, remail the same letter to both the new property owner and the title company by registered mail. If that does not work, you have two choices, you can consider suing them or try to have a Sheriff levy the property. Strongly consider hiring an attorney at this point, and then either:
A) If you have your facts straight, the judgment is large enough, you can attempt to sue them.
B) Send the title company and the new property owner of them by registered mail, a “Notice of Intent to Levy”. If that does not work, get your writ from the court.
If the property is a residence, there are restrictions: the property has to have a high enough fair market value to pay off all liens of higher priority, including the homestead exemption of the new owner, plus enough for the Sheriff’s fee (maybe $5,000) for service of the levy and the sale of the property at auction, plus enough to make some significant payment towards paying off the judgment. If the first option does not generate a bid of at least 90 percent of the fair market price value, you have to get a court order to try another auction to accept a sale price less than 90 percent.
Get your levy paperwork ready, and mail it to the title company and the new property owner, with the date that you will proceed. Due to the FDCPA, make sure you are willing and able to proceed with the sale, however there is no reason to file and pay the court and Sheriff, until the deadline passes. On the date you specify, check the new property owner for bankruptcy filings, then proceed and turn your paperwork over to, and pay the Sheriff. At the court, file an “Order to show cause why property should not be sold”, worded as if the judgment debtor still owned the property. At the hearing “Order to show cause why property should not be sold”, the judge will ask you what steps you have already taken to resolve the matter.
In California, CCP 700.015 covers the situation where service is required upon the person that is listed as the title owner, when it is someone other than your judgment debtor. The theory is that the interest subject to the abstract never transferred away from debtor so one is actually, still, simply levying upon the debtor’s interest in the property. Sometimes it is called executing upon a lien.
A real property levy must go through the Sheriff. If it is a dwelling, you need to get everything lined up for your application for order for sale of dwelling, including the litigation guaranty and appraisal. You need to have this ready to go before you levy because there are some tight deadlines for notices and service. Rutter’s Enforcing Judgments and Debts covers this topic very well.
You might have to start a forced sale of the property to get them to pay. Expect them to tell you lies such as there is no equity, or to confuse you by telling you about equitable subrogation. Equitable subrogation does not apply when you record a lien before the debtor acquires property (except in Florida). The down payment on the home sale alone, is one source of equity. Your prior lien may make you a secured creditor. You might wish to wait for the economy to rebound a bit before starting a forced sale to get paid.
Getting and recording judgment liens does not guarantee that a judgment creditor will get paid. In fact, usually, these days, recording liens will not result in any payment. However, getting and recording a lien is not difficult or expensive, and may be a good first step to eventually getting paid.