Judgment Liens and the Texas Homestead

Introduction

A Texas judgment when properly abstracted in the real property records “constitutes a lien on and attaches to any real property of the defendant, other than real property exempt from seizure or forced sale under Chapter 41, the Texas Constitution, or any other law, that is located in the county in which the abstract is recorded and indexed, including real property acquired after such recording and indexing” (Texas Property Code Sec. 52.001). However, Property Code Sec. 52.0012, which became effective September 1, 2007, provides a procedure for releasing homestead property from a judgment lien. Note that this procedure is available only to abstracts of judgment filed after September 1, 2007.

In the past, a homestead property was not exempt from a perfected lien, but it was exempt from forced sale so long as the property remained the homestead of the debtor. Exocet Inc. v. Cordes, 815 S.W.2d 350, 352 (Tex.App.-Austin 1991, no writ). Section 52.0012 now provides a statutory method for securing a release of any judgment lien against homestead property.

Statutory Affidavit

Property Code Sec. 52.0012 provides for the filing of an Affidavit that must substantially comply with the form that appears in this section of the Code. Filing of the affidavit must be preceded by a 30 day notice letter, sent certified mail and addressed to the judgment creditor and its attorney of record. The letter must contain a copy of the affidavit that the homestead owner intends to file in the real property records. The requirements of the letter and the affidavit are highly technical and should be done by an attorney knowledgeable in this procedure.

The judgment creditor may contest the homeowner’s action by filing a contradicting affidavit if there is reason to believe that the homeowner’s affidavit is false.

Release of Judgment Lien

The ultimate result, if this procedure is followed to the letter, is that the homeowner’s affidavit serves as a release of the judgment lien as to the homestead property. Also, subsequent bona fide purchasers and mortgagees are entitled to rely absolutely on the homeowner’s affidavit.

The First Step in Lien Removal

The first step in removing a lien should be to contact the judgment creditor or its attorneys and inform them that the lien is currently showing against the homestead and formally demand that the creditor execute a partial release or legal action will be taken without further notice. The legal basis for this demand is Tarrant Bank v. Miller (833 S.W.2D 366) which decided that a judgment creditor was liable in damages if it failed after demand to give a partial release of a judgment as to the debtor’s homestead. Creditor attorneys are knowledgeable concerning the potential liability here for their clients, so often they will cooperate and advise the creditor to sign the release. Sometimes, however, this does not happen and it will be necessary to proceed with the steps outlined in Sec. 52.0012.

Do-it-Yourselfers Beware

Demanding and negotiating the partial release of a judgment lien against the homestead is a complex task that must be performed in exact compliance with the case law and the statute. Clients who attempt this job themselves run the risk that if (and likely when) they fail to obtain a release, a real estate lawyer may not only have to start the process over but may also have to spend time undoing damage the client has done to his own case.

Title Companies Are Now the Problem

Title companies, being the conservative, risk-averse institutions that they are, have been reluctant to close transactions without demanding that judgment liens – even when they are against the homestead – be paid before they will insure the new buyer’s title. They do not want the potential liability; therefore, many title companies are behaving as if the new statute does not exist. The unfortunate effect of this is to force the “shopping” of title companies to find one that is friendly to Sec. 52.0012 before opening title. One might reasonably expect that the legislature will amend this statute in the future.