In the course of an ordinary real estate transaction, our firm orders a title report on the property being sold. Contained in the title report is a judgment and lien search, which shows any outstanding judgments against the seller and liens against the property. Why is this important? In New York State, a money judgment, when filed in the Supreme Court of a county in which a debtor owns real property, become a lien on property for a period of ten (10) years. Furthermore, a judgment creditor may file a motion at the end of the ten year period to extend the lien for an additional ten years. After twenty years, the judgment is no longer a lien on the property.
Therefore, when a seller of real property has a recorded judgment less than ten years old, it becomes an issue which must be cleared prior to closing. The reason for this is that the contract most likely provides that the property will be conveyed free of judgments and liens, and, in addition, a mortgage lender will not approve a loan to close without resolution of an outstanding judgment or lien. If the judgment remains as a lien on the property, the new owner may find himself subject to a foreclosure proceeding against his newly-purchased property, even though the judgment was not incurred by him.
Since most standard Contracts of Sale in New York contain a clause that the property must be conveyed free of all outstanding liens and judgments, it is the seller’s responsibility to ensure that there are no judgments against the property. Failure to do so would give the potential buyer grounds to have the contract cancelled and receive a refund of their downpayment. Obviously a seller does not want that to happen. What does a seller do when there are outstanding judgments of record?