Real Property Enforcement Archives - The Grundon Law Firm

Determining Senior Lien Balances After Recording an Abstract of Judgment in California

Recording an abstract of judgment is often the first meaningful step in turning a court judgment into real enforcement leverage. Once the abstract is recorded in the county where the debtor owns real property, the judgment becomes a lien against the debtor’s interest in that property. The lien establishes priority against later encumbrances and preserves the creditor’s ability to benefit from a refinance, sale, or other equity event.

But recording the abstract alone does not reveal whether the property actually contains recoverable equity. Most real property is already encumbered by one or more deeds of trust. Before a creditor can determine whether further enforcement activity makes economic sense, the creditor must determine the current balance owed to senior lienholders.

That information rarely appears in the public record. Determining the balance of senior liens requires a combination of title review and statutory payoff requests.

Step One: Record the Abstract of Judgment

A judgment lien against real property is created by recording an Abstract of Judgment in the county where the debtor owns real property. Once recorded, the lien attaches to the debtor’s interest in real property located in that county pursuant to Code of Civil Procedure §697.310.

Recording the abstract establishes the creditor’s priority relative to other encumbrances. Any deeds of trust recorded before the abstract will be senior to the judgment lien.

Once this occurs, the creditor becomes a junior lienholder relative to those prior encumbrances. That status is important because it allows the creditor to request payoff information from the senior lender.

Step Two: Identify Senior Liens Through Title Review

The next step is determining which liens are senior to the judgment lien. This usually begins with a title search or property profile identifying the recorded deeds of trust and other encumbrances affecting the property.

The recorded deed of trust will typically reveal the lender, the trustee, the recording date, and the original loan amount. What it will not reveal is the current payoff balance of the loan.

A deed of trust recorded many years earlier may have been partially paid down, modified, or refinanced. Without knowing the current payoff balance, it is impossible to determine whether the property contains equity that could support enforcement activity.

Understanding the priority structure of real estate liens is a critical step in evaluating execution against California real property.

Step Three: Request a Payoff Demand from the Senior Lender

California law allows a junior lienholder to request payoff information directly from the beneficiary of a deed of trust. Civil Code §2943 requires the beneficiary to provide a payoff demand statement upon written request from an “entitled person,” which includes a junior lienholder.

Once the abstract of judgment has been recorded, the creditor may send a written request for a payoff demand statement identifying the property and the deed of trust.

Under Civil Code §2943(c), the beneficiary must provide the payoff statement within twenty-one days after receiving the request.

The payoff statement typically includes the total amount required to satisfy the loan, the per diem interest amount, and any additional charges required to pay the loan in full.

Where Payoff Requests Are Typically Sent

In practice, payoff requests are often sent to more than one location to ensure the request reaches the correct department.

The request is typically sent to the beneficiary identified in the deed of trust, which is the lender that holds the loan. Because many lenders use separate servicing departments to process payoff requests, a second copy is often sent to the lender’s mortgage servicing department. Some practitioners also send a copy to the trustee identified in the deed of trust, which may forward the request through its lender contacts.

Providing a copy of the recorded abstract of judgment with the payoff request often improves response rates because it confirms the requesting party’s status as a junior lienholder.

Step Four: Evaluate Equity Before Pursuing Execution

Once the payoff information is obtained, the creditor can compare the balance of the senior liens with the estimated value of the property.

If meaningful equity exists beyond the senior liens and any applicable homestead exemption, the creditor may consider further enforcement activity. A levy on real property under a writ of execution is made by recording a notice of levy pursuant to Code of Civil Procedure §701.510.

If the property is a dwelling, the court must determine whether a sale would likely produce a bid sufficient to satisfy the homestead exemption and senior liens before ordering a sale. This determination is governed by Code of Civil Procedure §704.780.

Because that analysis depends heavily on the balance of senior liens, obtaining accurate payoff information is a critical early step in real property enforcement.

Why This Step Matters

Real property enforcement often turns on a relatively simple question: does the property contain recoverable equity?

Recording an abstract of judgment establishes the lien, but determining the balance of senior encumbrances reveals whether the lien represents a passive priority position or a meaningful enforcement opportunity.

For that reason, requesting payoff information under Civil Code §2943 is one of the most important early steps in evaluating real property enforcement.

Understanding how this process fits into the broader enforcement strategy is part of effectively enforcing a judgment against California real estate.

OBTAINING THE ORDER FOR AN EXECUTION SALE OF REAL PROPERTY

The nuts and bolts of preparing a real property levy.

This blog post is the nuts and bolts of preparing a real property levy. It assumes you’re you’ve determined that a real property levy is viable. I’ve written a separate blog on that issue here. Once you have determined that a property you have a judgment against is appropriate for a real property levy now you must take all the steps necessary to have an execution sale. This process is highly technical and requires a lot of time and patience.

This property was sold at an execution sale in April 2021 for $2,835,000.00

First, obtain a writ of execution for the county which the sale will take place. Make sure you have included all of the allowable costs and calculated the interest prior to filing a memorandum of costs with the court to seek the writ of execution.

Next, prepare the application for real property levy with the county sheriff in the county where the sale will take place. Each County’s application is slightly different, but it will likely need to include a legal description of the property you intend to execute on (you can typically find the legal description on the deed to the property). You submit it to the sheriff with the writ of execution and the levy fee. Some counties require only a deposit, some to record the levy, and some counties ask for the whole fee to sell the property upfront, which can be thousands of dollars.

The sheriff will process the levy, and if everything is in order they will record it and send it back to you. Once the levy is recorded you must make an ex parte application to sell the property. You must serve it on the sheriff within 20 of days of the levy. https://codes.findlaw.com/ca/code-of-civil-procedure/ccp-sect-704-750/. If the property you seek to sell in the county where the judgment was entered you just use your normal case number. If the property is not, you must file an abstract of judgment in the county where your property located to get a case number to get your ex parte heard and order to sell the property issued.

While you can’t file the ex parte application for the sale of the dwelling until after the levy is recorded, I suggest that you prepare it (and the abstract if your matter is not in the same county as the property you are selling) prior to submitting the levy paperwork to the sheriff.. That way as soon as you get the levy back you can concentrate your efforts on obtaining the ex parte hearing date and getting the application served in plenty of time to meet the deadline.

The ex parte application should identify all of the lienholders, their addresses, and the amount due on each lien (you should have obtained this information when you obtained your litigation guarantee or by sending a letter to senior lienholders, as I mentioned in the first blog on executing on real property). The application should also state whether there is a homestead or a veteran’s exemption, and the fair market value of the property.

If everything is in order with the ex parte application and service the court will set a hearing date for the motion for the order to sell the property. The hearing must take place within 30 days of the ex parte application. Once the court issues the order and gives you the time and date you must prepare a new notice of hearing. The notice of hearing and application for sale must be served on the occupants of the dwelling and posted on the property.

CAN YOU FORCE A SALE OF REAL PROPERTY?

One of the first steps you take after obtaining a judgment is to record an abstract of judgment in each county your judgment debtor owns property. Recording an abstract establishes a lien on the property and prevents your judgment debtor from selling or refinancing their property without your consent.

In many instances once you’ve taken this step you can sit back and let the judgment accrue interest at 10% per year and wait until the judgment debtor attempts to sell or refinance property. Sometimes a more aggressive approach is warranted to force the sale of the asset. The best tool to do this is to levy the property with a writ of execution to initiate a sheriff’s sale. A sheriff’s sale is an expensive and time consuming process but if done correctly under the proper circumstances, it is a powerful tool. This post details the steps you should take to determine whether a real estate levy is a viable option for your case.

The property pictured in the header of this post is a 4 bedroom 3.5 bath home of over 6,000 square foot on .97 acres in Pleasanton (East Bay) California. It was sold by Alameda (Oakland) Sheriff’s Department on an execution sale directed by my office. It sold for over 2.5 million dollars.

A real property levy can only be used when the judgment debtor has equity in the property over the liens senior to your position on the property. Put simply: if the property is sold, all lienholders ahead of you have to be paid in full before any money can go towards the satisfaction of your judgment. You will not be able to obtain an order from the court to allow the sheriff to conduct the sale if the sale would not produce any funds to satisfy your judgment. The first step is to determine if you would get any money from the sale of the property is to determine what liens have a higher priority than you. To do this you should conduct a public records search to see what, if any liens are on the property recorded prior in time to the abstract of judgment you have recorded in the county where the property is located.

When you have determined which liens are ahead of you the next step is to determine the balance of each lien. If you have recorded an abstract on the property, Civil Code 2943(a)(5) allows you to send a letter to any senior lienholder to obtain a payoff statement of their lien within 21 days of the letter. After you have determined the balance of the senior liens you need to determine whether a disabled veteran exemption or homestead exemption applies. A homestead exemption is either recorded or can be claimed, if the exemption is claimed the burden of proof is on party claiming it but you must make your own decision prior to taking the next steps on whether you believe the exemption applies. Additionally, the amount of homestead exemption differs in family circumstances and when you first obtained your lien on the property. If the lien is first recorded prior to 2021 the amount is significantly smaller. Next, you need a rough estimate of the Fair Market Value of the home. Using all the information you have obtained you should have an idea of whether there is equity or not in the property and whether you want to proceed with the next very expensive steps. If there is a homestead exemption present on the property, the sale price of the home can be no lower than 90% of the fair market value.

If you have determined there is equity in the property you are now ready to proceed with steps necessary to levy the property and obtain an order for sale from the court. Part II of this post will detail the levy process and obtaining the order for sale.

Technical Enforcement Guide Series

This article is part of a series of Technical Enforcement Guides discussing practical tools used in California judgment enforcement.

Bryan M. Grundon has focused on judgment collection and post-judgment enforcement for more than 20 years, representing creditors in enforcement matters throughout California.

HOW TO CLEAR JUDGMENT LIENS TO CLOSE REAL ESTATE TRANSACTIONS

The real estate, mortgage and escrow industries frequently intersect with my business when someone needs to clear a judgment lien in order to finish a refinance or sale of a home. I have found that most of these professionals do not know how to remove a judgment lien on real property after a judgment has been satisfied. Most of these professionals incorrectly believe it is the responsibility of the judgment creditor.

A judgment lien on real estate is created when a judgment creditor records an abstract of judgment in a county where the judgment debtor has property. A recorded abstract of judgment also attaches to all property the judgment debtor currently owns and all after acquired property in that county.

When a judgment is satisfied by the debtor, the judgment creditor must file with the court a satisfaction of judgment. If the creditor has recorded an abstract it must list the counties it was recorded in and the number of the recorded document. Once this document is filed it is to be served on the judgment debtor. However, the filing of the satisfaction of the judgment does not release the judgment lien created by the abstract of judgment. The judgment debtor is responsible to record the satisfaction of judgment in the county where the property is held. To accomplish, the judgment debtor needs to obtain a certified copy of the satisfaction of judgment and take it to the county recorder’s office and pay the recording fee.