Help! I have a Lien on My Homestead

The homeowner’s problem: “I am trying to sell/refinance my home. A closing is scheduled at the title company, but the title commitment prepared by the title company indicates an abstract of judgment lien filed in the county real property records by a judgment creditor, and the title company won’t close until the lien is removed, apparently because the lien casts a “cloud” on my homestead title.” What can I do?

The first thing the homeowner needs to confirm is whether he is indeed the same person as the judgment debtor named in the lien document. In most cases the lien arises from a default judgment. Perhaps the homeowner never answered the lawsuit and a default judgment was signed, many times without the homeowner even being aware of that fact. More often than not, the judgment relates to credit card debt. Perhaps the homeowner’s thinking at the time was “I have no defense to the lawsuit and if the judgment creditor wants to take a judgment against me, so be it. All I have is my home and I know that in Texas the judgment creditor can’t take that away from me.” Although that “reasoning” is legally correct, problems start when the homeowner attempts to sell or refinance. The judgment lien will prevent the sale/refinancing until the lien is released by the appropriate document filed in the county clerk’s records.

In Texas, homesteads are considered favorites of the law. The Texas Constitution provides that a homestead is exempt from seizure for the claims of most creditors. This deference to the homestead exemption requires courts to enforce homestead laws even when the result may be to assist a dishonest debtor by wrongfully defeating his judgment creditor’s efforts to satisfy the default judgment. However, that “black letter” law doesn’t satisfy the title company. The title company in Texas will refuse to issue clear title to the buyer or the lender until such time as the lien is released. The reason? That lien “clouds” the title, even though the judgment creditor cannot force a sale to satisfy its judgment.

The homeowner must obtain a copy of the recorded abstract of judgment since he must determine the contact information of the judgment creditor’s attorney and determine if that attorney still represents the creditor. The homeowner can get that from the title company. The homeowner can then send a letter to the attorney requesting a partial release of the lien as to the homestead property only. If the judgment creditor signs it, the judgment lien will continue in existence and the homeowner will still be liable for the creditor’s judgment, it just won’t cloud the title of the homestead property. Although the homeowner can try to do this himself, this is where an attorney should be retained. That retained attorney would try to make things as easy as possible by enclosing the following documents with his letter to the judgment creditor’s attorney:

a “Homestead Affidavit” from his client ( the retained attorney wants the creditor to know that his client has always claimed the property as his homestead property, i.e., he has permanently resided on the property since the date of purchase); and

a “Partial Release of Judgment Lien” (the retained attorney wants to make it as easy as possible for the creditor to release the lien so he includes the document that the judgment creditor can sign).

In addition, the retained attorney will advise the judgment creditor that if he refuses to sign the partial release document, that his client (the homeowner) may have a claim for damages against the judgment creditor for “slander of title” should the homeowner lose the pending sale or be unable to refinance and suffer damages. The retained attorney might even enclose a copy of applicable case authority for that position. More often than not, the judgment creditor will reluctantly sign the release document after grumbling that the homeowner is a “deadbeat” or the judgment creditor will complain of the “unfair” laws in Texas that protect judgment debtors.

Notwithstanding the efforts of the retained attorney, sometimes he is unsuccessful at securing the signed release document from the judgment creditor because:

the judgment creditor cannot be located;
the judgment creditor simply refuses to sign because he is not going to do anything to help the very person that owes him money, notwithstanding the threat of a slander of title lawsuit; or
the judgment creditor disputes the homeowner’s position and claim that the subject property has been continuously resided in as homestead property (i.e., the property is not “homestead” in character).

Even in this situation, there is another alternative. For judgment liens recorded in 2007 or later, Texas law arms the homeowner with one more arrow in his quiver to satisfy the title company’s demand for a release of lien.

Section 52.0012 of the Texas Property Code provides for the use of the “Homestead Affidavit as Release of Judgment Lien” (the “Homestead Affidavit” ). The form of the Homestead Affidavit is set forth in the statute and requires the following:

the homeowner must send a letter and a copy of the Homestead Affidavit (without attachments and before execution of the Homestead Affidavit) notifying the judgment creditor of the affidavit and the homeowner’s intent to file the affidavit
the letter and the Homestead Affidavit must be sent by registered or certified mail, return receipt requested, 30 or more days before the Homestead Affidavit is filed of record with the county clerk;
the letter and the Homestead Affidavit must be sent to (i) the judgment creditor’s last known address, (ii) the judgment creditor’s address appearing in the judgment creditor’s pleadings in the action in which the judgment was rendered, (iii) the address of the judgment creditor’s last known attorney, and (iv) the address of the judgment creditor’s last known attorney as shown in the records of the State Bar of Texas (if different from 3(iii) above).

The Homestead Affidavit is filed with the clerk after the expiration of the 30 day time period. If the judgment creditor does not file a “contradicting affidavit” in the clerk’s office (that usually does not occur), then the Homestead Affidavit serves as a release of the judgment lien and should satisfy the title company that the “cloud” on title has been lifted.

Needless to say, the 30 day notice part of this process may require the homeowner to convince his buyer to extend the closing date to allow the 30 day time period to run. Also, expect the title company to perform one final title search on the closing date to make sure the judgment creditor did not file a contradicting affidavit.

This statutory procedure requires attention to detail as the title company will be reviewing the aforementioned documents to make sure they comply in every respect with the statute. There are simply too many requirements that can be missed by the homeowner who attempts to do it himself. For that reason, it is strongly recommended that the homeowner retain the services of a qualified attorney to handle all of the procedures described above.

To consult with an attorney call the Houston Lawyer Referral Service 713-237-9429 and request a referral to a Houston real estate lawyer.