In Part 1 of our article, we discussed the procedures a title company follows for clearing voluntary liens. In Part 2, we will cover involuntary liens that affect real property and the suggested procedures for clearing these liens.
A judgment creditor may enforce a judgment obtained from a court by recording a transcript of the judgment with the clerk and recorder. Once the transcript of judgment is recorded, the judgment becomes a lien on the judgment debtor's property and will remain a lien until paid or out by time (usually six years from the date of entry of the judgment, or longer i the judgment lien is revived).
In order to clear the title, the title company will request a payoff from the judgment creditor or its attorney and will remit the payoff after closing.
Federal and State Tax Liens
Federal and State Tax Liens are statutory liens filed by the Internal Revenue Service or the State of Colorado for unpaid taxes. The recording of the tax lien attaches to any property owned or subsequently acquired by the taxpayer.
In order to clear the title, the title company will request a payoff from the IRS or the Colorado Department of Revenue and will remit the payment after closing. The IRS may take as long as six weeks to provide the payoff and will require its own authorization forms to be provided by the taxpayer, before it will issue the payoff.
Homeowner's Association Assessment Lien
Homeowners associations have a statutory lien for payment of assessments levied against the individual unit owners in any common interest community. Usually a statement of lien will be recorded to evidence of the amount owing under the lien if the owner has failed to pay the assessments when due. The title company will contact the association or the management company for a payoff and collect this amount at closing. A release of lien must be obtained from the association and recorded.
A mechanic's lien is a statutory lien given to persons or contractors for the purpose of securing the payment of work performed and materials furnished in the construction or repair of any improvements on land.
If the title commitment requires the release of the mechanic's lien, the title company will contact the lien claimant for the payoff amount for the lien, and will remit the payoff after closing. The lien claimant must provide a release of the lien for recording.
A Notice of Lis Pendens is recorded to give notice to all persons that a lawsuit is pending the outcome of which may affect the ownership of specified property. The title company should contact the attorneys involved for a release of the property from the lawsuit. This may be difficult to obtain in the circumstances of the litigation. If a release is provided, this should be issued by the court and then recorded.
Escrows for Liens
If the owner of the property disputes a lien, either that it is invalid or the amount owing is incorrect, the title company may agree to escrow funds sufficient to cover the anticipated cost of paying the lien, unless the dispute is settled. The owner will be required to sign an escrow agreement with indemnities to the title company. This procedure will require additional approvals from senior underwriting staff.