Can someone file a lien against me and my property without my knowledge?

Yes. There are different types of liens that may be filed against property that you own and some of them don’t require your signature. Of course, the most obvious lien is a Deed of Trust that is recorded when you take out a loan using your property as collateral. A Deed of Trust would require your signature, but there are scammers out there who will forge signatures and file fraudulent Deeds and Deeds of Trust against property in order to attempt to steal the property from the rightful owner.

The types of liens that do not require your signature include Mechanics and Materialmans Liens (“M&M Liens) judgment liens and tax liens. M&M Liens are liens that any worker who does work on your property can record to help ensure they are paid for the work. They have a one year statute of limitations in Tennessee to file a lawsuit in order to enforce that lien and if they do not file the lawsuit within one year, the lien will lapse and will no longer be effective. However, if you are trying to sell the property or take out a loan against the property within that one year period, it is likely the lien would need to be paid off. Judgments are issued by a judge when someone sues you and wins the lawsuit against you. Those judgments can be recorded in the Register’s Office and will attach to any property you own in that county. Most of the time, if you are sued and served process, you show up in court and are aware that there is a judgment against you. But if you do not show up in court and the plaintiff gets a default judgment against you, you may not remember the judgment and may not realize that it can attach to your property. In Tennessee, judgment liens have a ten year statute of limitations from the date the judgment is entered. Tax liens are when a homeowner doesn’t pay property tax, state tax or federal income tax. Those liens can be recorded without your signature and the property tax liens will attach to the property on which the taxes are delinquent and will eventually lead to a tax sale if not paid. State and Federal Income tax liens can attach to any property that you own, similar to a judgment lien.

How can I find out when someone files a lien or fraudulent deed against my property?

If your property is in Davidson County, the Davidson County Register’s Office has started an alert system that will inform you anytime anyone files a lien or a deed in your name. The Register has said that seniors, immigrants and people with multiple or vacant properties are especially at risk for this type of fraudulent activity. There are situations where a lien, such as a tax lien, is legitimate but the homeowner simple forgot to pay the bill. This system will alert them so they can make sure it is paid before they lose the property. To sign up for the free service, you must go to the Davidson County Register’s website and register your name and an email address to send notifications. The website is http://www.davidsoncorecords.com.

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Why do I have to pay off a lien when the debt is not mine?

I have seen several situations where there is a lien that attached to real property, but is not a debt for which the seller is personally liable. In those situations, the seller technically does not owe the debt, but it needs to be paid if they want to sell the house.

The most recent situation I had is with a seller who inherited the house from her father, who died almost five years ago. Prior to his death, there was a judgment lien against the father that was recorded in the Register’s Office. He died about four years after the judgment and the judgment creditor did not file a claim against his estate. Since there was no estate claim filed, the estate did not need to pay the judgment and the fathers heirs were also not responsible for the judgment. However, in Tennessee, there is a ten year statute of limitations on judgments…it has been almost (but not quite) ten years. Since the judgment had already attached to the property, there is no way the judgment creditor could collect on the judgment, unless the house was sold. In this particular case, the seller didn’t want to wait about three months until the statute of limitations had run, so the judgment had to be paid in order to close on the property.

Another situation I have seen is when the property was vested in a husband and wife and they got divorced. After the divorce, the ex-husband filed for bankruptcy and signed a quit claim deed to convey the property to his ex-wife. There was a judgment only against the ex-husband and he listed that judgment in his bankruptcy. Once the bankruptcy was discharged, he was no longer obligated to pay the judgment. However, the judgment creditor had recorded the judgment in the Register’s Office and it attached to the property before the ex-husband conveyed the property to his ex-wife. The ex-wife was trying to sell the property and unfortunately, in order to sell, she had to pay off the judgment that was never her responsibility and that her ex-husband was no longer responsible to pay because of the bankruptcy. Of course, the ex-husband may have been liable to his ex-wife for that judgment because of the divorce decree, but it still needed to be paid off so she could sell the house.

One more situation I have seen is when there is a lien against a prior owner of the property that was not paid off when the current owner purchased the property. If the current owner had a title policy when they purchased the property, that would probably cover this issue, but if they do not have a title policy, a lien that attached to the property would need to be paid in order to sell the property. There may be warranties that the seller gave the prior owner that would make them responsible for the lien, but when that happens, it is at least likely to cause a delay in the closing.

These are just a few situations where someone must pay the debts of others in order to sell their property and it is very sad to see that happen. By the time the seller finds out about the lien attached to their property, they have usually already made plans to buy another property and it is too late to back out of the property they are buying without breaching the contract. We can’t avoid these types of situations altogether, but it is important to work with professionals, who will properly inform clients (whether that is estate attorneys, divorce attorneys or closing attorneys) and help to make sure these situations are minimized.

Cash Closings

Everyone (except a lender) loves a cash closing, whether you are a listing agent, selling agent, seller or even buyer. When a buyer is paying cash, you don’t have to worry about loan approvals, loan delays, providing mountains of paperwork for the lender or a dreaded loan denial. However, a cash buyer will still want to make sure certain things are done before closing

  • Insurance. Since there is no lender to require a buyer to provide proof of insurance, it is up to the buyer to make sure they have coverage as of the closing date.
  • Home Inspection. It is always a good idea to find out any issues a property may have, even if the buyer isn’t going to require the seller to make any repairs.
  • Appraisal. If the buyer is concerned about the value of the property, it is a good idea to get an appraisal and make sure the contract is contingent on the property appraising for at least the purchase price.

The buyer has completed all of the inspections they require and have the money ready to wire to closing, but doesn’t have time to drive across town…Since it is a cash closing and there is nothing that the buyer will sign that will need to be recorded, the title company will probably not need original documents. If that is the case, it may be possible to email documents to the buyer to print and sign, then scan back to the title company. However, there may be a couple of documents that need to be notarized before they are emailed back. That will save time for the buyer and not necessarily require them to take off work for the closing. Of course, there may be instances where the cash buyer will need to sign in person, but in most cases, that will not be required and can be handled electronically with the buyer also sending the funds by wire transfer.

A title company still has the same responsibility to a cash buyer as it would with a buyer who was getting a loan. If the buyer is getting an owner’s title policy, the title company would search the property and clear any liens or other issues it finds in the search, before closing. The title company should also inform the buyer if there will be any unusual exceptions in the title policy. When there is a lender, they would probably not allow any unusual exceptions (like lack of access to a public road), but a cash buyer is depending on the title company to inform him or her of those issues prior to closing. I would typically tell the buyer about any issues myself and if the buyer still wanted to close on the property, have them sign a form acknowledging that I am informing them of the issue in writing.

Know What The Contract Says

It is very important to pay close attention to the details in a contract. Most residential real estate contracts contain form language with some sections that are “fill in the blank”. Those sections are all very important details of the specific transaction. Some obvious items you want to check are:

  • Purchase price
  • Amount of Earnest Money or Trust Money
  • Closing Date
  • Inspection Period
  • Which costs are to be paid by the buyer and which costs are to be paid by the seller
  • Home Warranty

However, you should also pay close attention to what your buyer is contracting to purchase or your seller is contracting to sell. Here are a couple of situations I have seen that could have been resolved easily if it was more clear before the contract was executed:

  1. I recently had a contract where the buyer’s agent prepared the contract with the street address of the property, referenced the map & parcel number for the property and referenced the prior deed, where the seller acquired the property. That seems like a situation where it is pretty clear which property is being sold. However, the seller had recently subdivided the property so he could sell the part of the property with the house on it and build another house on the other part of the property. The two new parcels were also assigned new parcel numbers. All of that was done at about the same time the contract was signed, so there was no way for the buyer’s agent to know that the property had been subdivided. If you were to look at the only the contract, it would appear that the buyer was purchasing 123 Main Street, but it was the seller’s intention to sell Unit A on the 123 Main Street Subdivision. This grew into a dispute that has become costly for both sides, but could have been easily resolved if the seller or seller’s agent had noticed that the entire property (123 Main Street) was listed on the contract instead of just one of the units, before signing the contract. That way, the buyer would have known what the seller intended to sell and could have adjusted the offer price accordingly.
  2. In another similar situation, I once closed on a foreclosure property where the seller was selling 356 Oak Ave, which was the property that had been foreclosed on. The buyer closed on the property and thought they were getting a house and a vacant lot that was surrounded by a fence attached to the house, but after closing, realized that the property at 356 Oak Ave. was separate from the fenced vacant lot at 358 Oak Ave. The original owner of both 356 and 358 had a loan only on 356 Oak Ave. That meant that the lender could only foreclose on 356 Oak Ave, because it had no interest in 358 Oak Ave. The original owner still owned 358 Oak Ave. and didn’t even realize it because he thought it had been foreclosed on during the house foreclosure. A little more research by the buyer or his agent (and clarification in the contract) would have made the buyer aware of what the seller was able to sell, so he could decide if that was what he wanted to purchase.

Why should a Buyer get a Title Policy?

There are many title issues that could cause problems for a buyer or may even cause the buyer to lose their home. Even a careful title search would not discover certain hidden risks and the buyer may not know about those problems until years later.

Here are a few issues that occur most frequently:

  1. Forged deeds, mortgages or releases of mortgages.
  2. Deed by a person who is mentally incompetent.
  3. Deed by a minor.
  4. Deed from a corporation given under a falsified resolution or not authorized by the corporate bylaws.
  5. Deed from a partnership that is not authorized by the partnership agreement.
  6. Deed from a trustee that is not allowed by the trust agreement.
  7. Deed challenged as being given under fraud, undue influence or duress.
  8. Deed following a non-judicial foreclosure, where the proper procedure was not followed.
  9. Deed executed under a falsified power of attorney.
  10. Deed executed under an expired power of attorney.
  11. Deed conveying property of a deceased person, not joined by all of the heirs.
  12. Conveyance by an heir or survivor of a joint estate, who murdered the decedent.

Some of these issues could be prevented by a diligent review of documents presented by the seller (for example: making sure a trust agreement allows the trustee to convey real estate), but many could not be discovered until someone comes forward at a later date making a claim to the property. A buyer should always consult with a reputable attorney or title company before purchasing real estate, to discuss the potential risks the buyer may encounter if they choose to not purchase a title policy.