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Copyright © 2015. All rights reserved worldwide.

REMOVAL OF LIENS AGAINST THE HOMESTEAD


by David J. Willis, J.D., LL.M.


Introduction

This article addresses procedures available to secure the release of liens against the homestead. For a discussion of removal of invalid mechanic’s and materialman’s liens, child support liens, and fraudulent liens, see our companion web article entitled Lien Removal – All Lien Types.

Two sets of rules apply to homestead lien removal. In order to determine which rules apply, one needs to determine if the judgment in question was abstracted before or after September 1, 2007.

Judgment Liens Abstracted Prior to September 1, 2007 (Old Law Applies)

In the case of judgment liens abstracted prior to September 1, 2007, the old law as set out in the1992 case of Tarrant Bank v. Miller, 833 S.W.2d 666 (Tex. App.--Eastland 1992, writ denied), applies. Tarrant Bank decided that a judgment creditor may be liable in damages if it fails after demand to give a partial release of a judgment as to the debtor’s homestead. The best approach to removing an older lien would therefore be to send the creditor’s attorney a demand for a partial release accompanied by a credible threat of litigation if the release is not signed. In other words, this is a demand/negotiation scenario rather than a statutory procedure. Eventual recourse to litigation cannot be ruled out.

Judgment Liens Abstracted after September 1, 2007 (New Law Applies)

Property Code section 52.0012(c), in contrast to the old law, is a statutory notice and affidavit process available as to liens against the homestead which are abstracted September 1, 2007. Note the use of the word “abstracted.” If the judgment was rendered before this key date but it was not abstracted until afterward, then the new law would apply.

A judgment lien does not attach to a judgment debtor’s exempt real property, including the debtor’s homestead. It can be difficult, however, to persuade a title company that they should ignore a judgment. A title company’s automatic, self-serving reaction is usually to require that all liens be cleared. The homeowner should resist this pressure and insist on his or her homestead rights. 

As is true with other liens, the first step in the process under the new law is a demand letter—in this case, a 30-day letter to the judgment creditor and its attorney. If there is no response, Property Code section 52.0012 provides that a judgment debtor may file a “Homestead Affidavit as Release of Judgment Lien” which “serves as a release of record of a judgment lien established under this chapter.” The affidavit must be in proper form, meeting all requirements of the statute. However, if the judgment creditor files a contradicting affidavit, and if after filing such contradicting affidavit a purchaser or mortgagee of real property acquires the purchaser’s or mortgagee’s interest from the judgment debtor, then the debtor’s affidavit does not act as a release of the judgment lien with respect to the purchaser or mortgagee. 

The following is a checklist for evaluating whether or not this procedure applies in a particular case. A title company will not insure over a homestead lien using the new law unless:

1. the abstract of judgment is recorded after September 1, 2007;

2. a 30-day demand letter has been sent by CM/RRR to the creditor and its attorney enclosing a copy of the affidavit that is intended to be filed, with evidence of homestead status included;

3. proof exists (e.g., a signed USPS green card) that the creditor and its attorney received the letter and affidavit at least 30 days prior to the date that the affidavit was recorded;

4. the title company’s plant is certified to the 31st day following the mailing of the letter and affidavit;

5. no contradicting affidavit is recorded by the creditor;

6. the size of the property does not exceed 10 acres, if urban, or 200 acres, if rural (100 acres if the debtor is single); and

7. the proposed purchaser or lender is a bona fide third party, paying money for or lending money against the property.
The Flaw in the Process

There is nothing in the statute that requires a title company to accept the affidavit provided for in section 52.0012 (the new law) and then go forward with closing and issuance of one or more title policies. In other words, the law is not self-enforcing. Title companies, being the conservative institutions that they are, may hesitate or refuse to go along, which can be a disappointment to a seller who has diligently followed the provisions of the lien removal statute. A title company determined to avoid potential liability may simply claim that one’s affidavit is unacceptable to them – and not even explain why, which has happened to this author more than once. As in other situations, it may be necessary to shop title companies until one is found that is amenable to this process.

Client Expectations

The usual question from a client is "Can you get this lien against my homestead released?" The expectation is that the attorney will obtain a Release of Lien that when recorded will conclusively, as a matter of fact and law, permanently remove the lien. Attorneys must be careful to manage the client’s expectations in this regard. The statute does not provide for a traditional Release of Lien. It provides for a "Homestead Affidavit as Release of Judgment Lien" – i.e., an affidavit which only serves as the equivalent of a release if a title company agrees that it does. That is a critical difference. Accordingly, the attorney must be careful not to guarantee any particular outcome – only that the statutory notice and affidavit process will be followed. In turn, the client must accept the potential limitations on the process.

What Does the Attorney Need from the client?

When asking that an attorney initiate the process of removing a lien from the homestead, the client should be prepared with a number of items: (1) a copy the abstract of judgment (if a copy of the judgment itself is available, supply that as well); (2) a copy of the warranty deed to the homestead; (3) a print-out from the local appraisal district indicating that the property is classified as homestead (or sometimes there is a notation that it is "HS"); (4) the name and address of each judgment creditor and/or its attorneys; and (5) correspondence between the judgment creditor and the client.

Note item (4). Clients often expect a lawyer to be able to locate their creditors as part of the lien removal process. This may not be a reasonable assumption, since lawyers are not usually also private investigators. Demand letters may be returned labeled "no such address" or the like. If an investigator is needed, the client must be prepared to bear that additional expense.

 

DISCLAIMER

Information in this article is proved for general informational and educational purposes only and is not offered as legal advice upon which anyone may rely. The law changes. Legal counsel relating to your individual needs and circumstances is advisable before taking any action that has legal consequences. Consult your tax advisor as well. This firm does not represent you unless and until it is expressly retained in writing to do so.

Copyright © 2015 by David J. Willis. All rights reserved worldwide. David J. Willis is board certified in both residential and commercial real estate law by the Texas Board of Legal Specialization. More information is available at his website, http://www.LoneStarLandLaw.com.