At least once a year,I receive the following inquiry fom a new client: “I am trying to sell my home. A closing is scheduled at the title company next week, but the title commitment reflects an abstract of judgment lien filed in the county real property records by a judgment creditor, and the title company refuses to close until the lien is released as to the homestead property. What can I do?” I first confirm that the client is indeed the judgment debtor named in the abstract. He almost always is. In almost all cases, the client suffered the judgment by default, i.e., he never answered the lawsuit, believing he had no defenses and his only asset was his home, which was safe from a creditor in Texas. Although correct, that judgment lien is now preventing the sale of the home. Indeed, what can the homeowner do?
In Texas, homesteads are considered favorites of the law and are exempt from seizure for the claims of most creditors. The constitutional prohibitions found in the Texas Constitution prevent a judgment lien from attaching to the homestead. The deference to the homestead requires the courts to enforce homestead laws even thought the result may be to assist tha dishonest debtor in wrongfully defeating his creditors. However, that black letter law does not satisfy the title company handling my client’s transaction. Irrespective of the validity of the lien, the title company in Texas will refuse to issue clear title unless the abstract is cleared.
My first order of business on behalf of my client is to obtain a copy of the recorded abstract of judgment since I must determine the identity and the contact information for the attorney that obtained the judgment on the creditor’s behalf. I then contact that attorney. If he is still representing the judgment creditor I send a letter to him requesting a partial release of lien as to the homstead property only, making clear I am not asking for a release as to any other property. I make sure to enclose with that letter a “Partial Release of Judgment Lien” document. To elicit a speedy reply, I also remind the attorney that if the judgement creditor refuses to sign the document, my client may have a claim for damages against the judgment creditor for “slander of title” should my client lose the pending sale. Sometimes the judgment creditor will reluctantly sign the release document after grumbling about my client being a deadbeat and the unfair laws in Texas protecting such deadbeats. But sometimes I am unsuccessful at securing the signed release document. The reasons are usually:
- the judgemnt creditor cannot be found, or
- the judgment creditor simply refuses to sign because he is not going to assist the very person that owes him money, notwithstanding the threat of a slander of title lawsuit, or
- the judgment creditor disputes my client’s contention that the subject property constitutes his homestead.
If the reason is the last one (dispute of homestead character), I will send a second letter to the attorney providing written evidence confirming the homestead character, as well as a copy of the sales contract, the title commitment, and the escrow officer’s written request concerning the need for a partial release of the judgment lien. This will sometimes get me the desired result. However, what about the situations involving the first two reasons noted above? What to do? Fear not, Texas law provides one more arrow in your quiver to satisfy the title company and allow the sale to close. Please read on.
Section 51.0012 of the Texas Property Code proivides 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. The statute requires the following:
- the judgment debtor 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 judgment debtor’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 was filed of record with the county clerk;
- the letter and the Homestead Affidavit must be sent to (i) the judgement 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).
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, then the Homestead Affidavit serves as a release of the judgement lien.
This statutory procedure requires great attention to detail as the title companywill be checking all documents with a fine-tooth comb. For that reason, It is strongly recommended that the judgment debtor retain the services of an attorney to comply with the statute.
Nothing in this post should be considered legal advice. Consult your own attorney for legal advice, or if you have none, contact me by clicking on my name above or calling me at (713) 626-2221. This is Blog No. 60.