Monthly Archives: April 2016

Real Property Judgment Liens in Colorado

by Michael Selinfreund, President/General Counsel of Cherry Creek Title Services, Inc. 

House closed in chain and padlock

April 25, 2016

This article is intended for educational purposes only and not as legal advice.

A Colorado state court judgment lien is created by recording a certified copy of a transcript of the docket entry of a judgment for any debt, damage, costs, or other sum of money rendered by any court of record.  C.R.S. 13-52-102(1).   A certified copy of the judgment (not the transcript) will not suffice in Colorado pursuant to Colorado Real Estate Title Standard 2.4.1 published by the Real Estate Section of the Colorado Bar Association.    Federal court judgment liens are created by recording a certified copy of the transcript of the docket entry of a judgment or decree rendered in a federal district or circuit court.

Once recorded, the judgment lien attaches to all non-exempt real property of the debtor presently owned or later acquired by the judgment debtor in the county or counties which the transcript is recorded.  The most common exempt property is the statutory homestead exemption.  When the property is subject to homestead protection, the lien only attaches if the net equity exceeds the homestead exemption.  C.R.S. 38-41-201(1)(a) provides for a Homestead exempt from execution and attachment arising from any debt, contract or civil obligation in the amount of $75,000.00 if the homestead is owner occupied or by an owner’s family.  C.R.S. 38-41-201(1)(b) provides for a Homestead exemption in the amount of $105,00.00 if the homestead is occupied by an elderly or disabled owner; an elderly or disabled spouse of an owner, or an elderly or disabled dependent of an owner.   C.R.S. 38-41-201(2)(B) defines elderly as 60 or older.  However, judgment liens do not attach to later acquired property of the judgment debtor when the judgment has been discharged in bankruptcy.  See In re Yates, 47 B.R. 460 (Bankr. D. Colo. 1985).

Judgment liens are valid for six years from the date of the entry of the judgment, not from the date of recording.  Prior to the end of that six-year period, the judgment creditor can revive the judgment lien for another six years.  See C.R.C.P. 54(h) and C.R. S. 13-52-102(1).   Judgment liens based upon unpaid child support, maintenance or arrearages thereof are valid for 12 years and can be renewed every 12 years indefinitely pursuant to C.R.S. 14-10-122 (1.5)(b)(2). Federal court judgment liens in favor of the United States remain in effect for 20 years.  If a judgment debtor changes their name and then acquires real property in a county where the judgment lien is already of record, the judgment creditor would be wise to record a notice of judgment and change of name.  Otherwise, the judgment lien is of no effect against an innocent purchaser of the property for value.

If a property subject to a judgment lien is conveyed to a new party without satisfying the judgment lien, the judgment lien will attach and be superior to the rights of the grantee of the deed.  However, In Colorado, the purchase money mortgage (deed of trust) wins over both the IRS and judgment liens already of record against the mortgagor in the same county.   See Emery v. Ward et al., 191 P. 99, 68 Colo. 373 (Colo. 1920).   In one Colorado case, the owner’s down payment was held to be senior to an existing judgment lien via equitable subrogation.  See Hicks v. Londre, 125 P.3d 452 (Colo. 2005).

Judgment liens are extinguished pursuant to C.R.C.P. 58(B) by the recording of a satisfaction of judgment.  Judgment liens against one joint tenant affecting property owned in joint tenancy are extinguished upon the death of the joint tenant debtor.  This has come as a surprise to many judgment creditors.  See Park State Bank v. McLean, 660 P.2d 13 (Colo.App. 1982). Shore Building & Loan Corp. v. Bank of Somerset, 253 A.2d 367, 253 Md. 525 (1969); Zeigler v. Bonnell, 52 Cal.App.2d 217, 126 P.2d 118 (1942); see 4A R. Powell, The Law of Real Property, § 618 (1979).

Equitable Subrogation in Colorado

By Michael Selinfreund, Esq., 

President/General Counsel of Cherry Creek Title Services, Inc.

Agent for Commonwealth/Fidelity and First American 

Equitable subordination is an equitable remedy that in certain circumstances allows a new lender who pays off an existing loan to retain the benefit from the payoff lender’s priority.  Let’s start with a common example.  A homeowner has a first and second mortgage on their property.   The homeowner refinances, and the new lender pays off the first mortgage but not the second.  Maybe the second verbally agreed to subordinate but never did.  Perhaps the subordination agreement was defective, or the second was missed in the title search.   Or, maybe the second was a HELOC that the new lender paid down to zero but the HELOC lender did not release their lien nor close the account, and the borrower subsequently drew against it.  If the homeowner stops making loan payments on the previous second that was never released, that lender will file foreclosure asserting they’re now in first position.

Colorado is a race-notice state.  The previous second won the race as it was recorded ahead of the new loan, and the new lender had both constructive (recorded) notice and maybe even actual notice.  However, based on the doctrine of unjust enrichment, the new lender can still be deemed to be in first lien position based on the doctrine of equitable subrogation.  See Colorado National Bank v. Biegert, 438 P.2d (Colo. 1968).

Interestingly, Colorado has gone a step further from the norm of limiting the use of equitable subordination in the context of refinance transactions and has allowed it in a sale transaction.  See Hicks v. Londre, 125 P.3d 452 (Colo. 2005).  In that case, a $400,000 judgment lien was missed.  This case is fascinating for two additional reasons as the court allowed equitable subordination despite the fact that the lien previously in first position was not satisfied in full, and the court also gave the benefit of equitable subordination to the new buyer’s down payment of $500,000 thereby putting their purchase money equity ahead of the missed judgment lien.

Of course, the Public Trustee (if in Colorado) will not serve as the arbiter of lien priority so the priority issue will be decided through a judicial process.  In the event the new refinance lender is given the benefit of equitable subordination, it will be capped at the amount that was paid off on the previous first mortgage lien.  Any remaining amounts will be junior to the missed second.

Let’s now take it a step further and assume the refinance loan that benefited from equitable subordination is subsequently refinanced and again that previous second is not released.  This can happen for a variety of reasons.  Title searchers examining the deed of trust being paid off recognize the form of the documents as typical first mortgage documents so they assume it’s in first position.  And, the searcher often relies on the previous title company’s efforts in insuring the “first” they’re now paying off and presume junior liens were all paid.  So, does the new lender also get to stand in the shoes of the lender they’re paying off who prevailed previously in establishing equitable subordination?   Almost certainly, the answer is “no”.   This concept is referred to as derivative subordination, and the only state I’ve seen it applied is in New Jersey.

Finally, do not confuse equitable subrogation with equitable subordination.  Not only do they sound similar, but they accomplish similar ends.  However, equitable subordination is used solely in bankruptcy cases pursuant to Section 510 (C) of the Bankruptcy Code.  It allows the Bankruptcy Court the ability to subordinate liens or even disregard them entirely in certain circumstances based on equitable grounds.

This article is intended for educational purposes only and not as legal advice.

Homebuyers Guide to the Home Buying Process

If this is your first time buying a home, follow this comprehensive guide to the home buying process:


Homebuyer-Guide-eCard

Homebuyers Guide Through the Home Buying Process

First Time Home Buyer Facts

 

Buying a home for the first time can be overwhelming. Our knowledgeable professionals can answer your title and closing questions and we are committed to making the home-buying experience a satisfying one for you. To help you begin your journey, here are some answers to a few of the questions that first-time home buyers may ask as they begin their quest to purchase their slice of the American dream.

 

 

Why should I buy instead of rent?
A home is an investment. When you rent, you write your monthly check and that money is gone forever. When you own your home, you can deduct the cost of your mortgage loan interest from your federal income taxes and usually from your state taxes. You can also deduct the property taxes you pay as a homeowner. In addition, the value of your home may go up over the years, building equity for you.

How do I know if I am ready to buy a home?

  • Do I have a steady source of income? Have I been employed on a regular basis for the last 2-3 years? Is my current income reliable?
  • Do I have a good record of paying my bills? Do I have few outstanding long-term debts, like car payments?
  • Do I have money saved for a down payment? Do I have the ability to pay a mortgage every month, plus additional costs?

If you can answer “yes” to these questions, you are probably ready to buy your own home.

What is title insurance and why do I need it?
An Owner’s Policy of title insurance protects the buyer against loss for title threats undiscovered at the time of closing and provides a defense in the event of claims against the title pursuant to the terms of the policy.

How much money will I need upfront to buy a home?
In general, you need enough money to cover three expenses: the earnest money (variable), down payment, and closing costs.
In addition to the mortgage payment, what other costs do I need to consider?
Utilities, property taxes, homeowners insurance, and maintenance costs are a few of the expenses to be considered. Additionally, there may be homeowner association or condo association dues.

How are pre-qualifying and pre-approval different?
Pre-qualification is an informal way to see how much you may be able to borrow. A pre-approval is the lender’s commitment to lend to you.

Should I use a real estate agent? How do I find a good one?
A good real estate professional can guide you through the entire process and make the experience much easier. All of the details involved in home buying, particularly the financial ones, can be mind-boggling. Start by asking your family and friends if they can recommend an agent. Look for an agent who listens well and The ideal agent knows the local area well and has resources and contacts to help you in your search