When a client is purchasing a home, my primary job as an attorney representing the buyer is to research the chain of title for the property and to make sure that no one can, as I like to put it, “come out of the woodwork and claim an interest in the new home.” I explain this to clients during the closing by stating that before they own the home, their seller owned it, and someone else before them, and so on. We call this the “chain of title.” When those owners owned the property, they had the power to affect title and subject the property to their mortgages, liens, and judgments. As the closing attorney, we examine that “chain” and make sure that everyone who previously owned the property owned it properly, conveyed it out properly, and during the time they owned it there were no outstanding judgments or liens against that attached to the property (or if they did attach, no longer remain). Generally, it’s easy to see how a judgment against a seller could negatively affect the new buyer’s ownership of the property. However, buyers could also face a problem if there are judgments against the buyer at the time they purchase the home.
In North Carolina, if a buyer has previously had a judgment against them in the same county as the real property being purchased and it has been fewer than 10 years since the judgment was ordered, the moment the property comes into the buyer’s possession that judgment may attach to the property. Practically, this means that if the buyer wants to later sell the property, refinance, or get a home equity line, the judgment will have to be paid out of the proceeds of the sale. Often, during our title search, we will find judgments against the buyer that even the buyer doesn’t know exists. As stated above, this can become an issue when the buyer later decides to sell the property and is surprised to find out that they have to pay a judgment out of their proceeds.
A fairly common issue that arises in regards to judgments is when a person inherits property and then tries to sell the property only to discover that they have a judgment against them. When a person inherits real property, they become the legal owner as soon as the person from whom they are inheriting passes. Practically, this means that if a person has a judgment against them, the moment that they inherit real property, that judgment can attach to it. At this point, even if the estate wishes to sell the property, that judgment will have to be satisfied first.
Another judgment issue that can surprise buyers involves marital property. In North Carolina, marital interests attach to property regardless of how the person takes title. This means that if a person decides to buy real property, their spouse will automatically have an interest in the property even if the spouse is not listed on title. In terms of judgments, depending on how a married couple has taken title, whether or not one spouse has a judgment against them could have an adverse effect on the other spouse taking title to the property. As such, your closing attorney will still do a search on both spouses just so that any potential judgment is brought to the attention of the buyer.
Essentially, when buying a home, it is best to be completely aware of any judgments that may affect your interest in the property. If you begin the process of purchasing a new home but aren’t sure if you have a judgment against you, always consult your closing attorney for the best way to proceed.
For questions or assistance with any closing issues, contact one of the real estate attorneys at Black, Slaughter & Black in our Triad, Metro-Charlotte, Triangle, or Coastal offices.