Release and Removal of Liens Against the Texas Homestead
by David J. Willis J.D., LL.M.
This article addresses procedures available to secure the release of liens against the homestead. For a discussion of removal of invalid mechanic’s and materialman’s liens, child support liens, and fraudulent liens, see our companion web article entitled Lien Removal – All Lien Types.
The first relevant event in the overall process is the filing by a judgment creditor of an abstract of judgment in the real property records of the county where the property is located (or in any county where the judgment creditor believes that the debtor may have assets). This is true because a judgment by itself does not act as a lien on anything. “The judgment creditor’s first step in creating a judicial lien is to obtain an abstract of judgment. When properly recorded and indexed [in the county clerk’s real property records], an abstract of judgment creates a judgment lien on non-exempt real property that is superior to the rights of subsequent purchasers and lienholders. The purpose of the abstract of judgment is to create a lien against the judgment debtor’s real property and to provide notice to subsequent purchasers and encumbrancers of the existence of the judgment lien.” Rogers v. Peeler, 271 S.W.3d 372, 375 (Tex.App.—Texarkana 2008, pet. denied). The key distinction is between exempt and non-exempt property, a critical difference when one is discussing the homestead.
Note on tax liens: liens for ad valorem taxes as well as federal income tax liens resulting from the tax debt of both spouses are expressly permitted by Texas Constitution article 16, section 50(a). There is no removal procedure for such liens other than entering into a payment arrangement with the taxing authority.
What is a judgment lien?
A court judgment against a person does not become a lien against real property merely by virtue of its existence as a final judgment. Several steps must first occur. Pursuant to Chapter 52 of the Property Code, the judgment creditor must obtain an abstract of judgment from the court and then file it in the real property records of the county where the property is located. “Without the abstract of judgment filed in the real property records, the rendition of a judgment does not create a judgment lien against the property.” Austin v. Coface Seguro de Credito Mexico. S.A. de C.V., 506S.W.3d 707, 712 (Tex.App.—Houston [1st Dist.] 2016, pet. filed). In other words, there may be a judgment, but there is no lien against specific real estate until the judgment is abstracted and filed and indexed by the county clerk. Abstracts filed in multiple counties create separate, independent liens.
Judgments and the Homestead
Texas Property Code Section 52.0012(c) states that a judgment lien does not attach to, and does not constitute a lien on, a judgment debtor’s exempt real property, including the debtor’s homestead. This is simply a fact. Assertion of a bona fide homestead is therefore an absolute defense in the event a creditor seeks to execute on a judgment by forcing the sale of the homestead. The creditor may seek to discover other non-exempt assets of the debtor and attempt execution on those, but not on the homestead. Moreover, if the homestead is sold, Property Code Section 41.001(5)(c) provides that the proceeds are not subject to seizure for a creditor’s claim for six months after the date of sale. Having said all of that, it is not uncommon to encounter a title company that demands that liens be released prior to closing—even if it is the homestead which is being sold—so lien release (or at least a partial release as to the homestead) can become an issue.
Some interesting caveats relating to timing: if a judgment lien attaches to property which subsequently becomes the debtor’s homestead, the validity of the lien is not affected. The debtor’s newly-acquired homestead interest is taken subject to the already-attached judgment lien. Similarly, if a debtor occupies a protected homestead but then abandons it, the judgment lien will attach. Barrera v. State, 2005 WL 1691037 (Tex.App.—Houston [14th Dist.] 2005). If a judgment debtor acquires a homestead after a judgment lien is abstracted, filed, and indexed in the county records, the property is nonetheless protected as long as it continues to be the debtor’s homestead. Hughes v. Groshart, 150 S.W.2d 827, 830 (Tex.Civ.App.—Galveston 1941, no writ).
Issues are also raised by the death of the owner of a homestead. If the owner of a protected homestead dies (either testate or intestate), and there exists an abstracted judgment against the decedent, then so long as the lien never actually attached to the property, the homestead descends to the heirs free of the judgment lien. National Union Fire Ins. Co. v. Olson, 920 S.W.2d 458, 461 (Tex.App.—Austin 1996, no pet.). However, if an heir is the subject of a judgment lien, then the lien attaches to the heir’s share of the former homestead the moment the heir acquires an interest—i.e., immediately upon death of the decedent. Woodward v. Jaster, 933 S.W.2d 777, 781-82 (Tex.App.—Austin, 1996, no pet.). Presumably this rule would not apply if the property were also the existing homestead of the heir at the time of death.
Returning to the issue of which rules apply to release and removal of a particular judgment, one needs to first determine if the judgment in question was abstracted before or after September 1, 2007.
Judgment Liens Abstracted Prior to September 1, 2007 (Old Law Applies)
In the case of judgment liens abstracted prior to September 1, 2007, the old law as set out in the 1992 case of Tarrant Bank v. Miller, 833 S.W.2d 666 (Tex. App.—Eastland 1992, writ denied) applies. Tarrant Bank decided that a judgment creditor may be liable in damages if it fails after demand to give a partial release of a judgment as to the debtor’s homestead. The best approach to removing an older lien would therefore be to send the creditor’s attorney a demand for a partial release accompanied by a credible threat of litigation if the release is not signed. In other words, this is a demand-negotiation scenario rather than a statutory procedure. Eventual recourse to litigation cannot be ruled out. Since the creditor cannot be compelled to accept anything less than full payment, eventual recourse to litigation cannot be ruled out.
Judgment Liens Abstracted after September 1, 2007 (New Law Applies)
Property Code Section 52.0012(c), in contrast to the old law, is a statutory notice and affidavit process available as to liens against the homestead which are abstracted after September 1, 2007. Note the use of the word “abstracted.” If the judgment was rendered before this key date but it was not abstracted until afterward, then the new law would apply. The abstract date is the key date, not the judgment date.
A judgment lien does not attach to a judgment debtor’s exempt real property, including the debtor’s homestead. It can be difficult, however, to persuade a title company that they should ignore a judgment. Even though a judgment lien does not attach to a judgment debtor’s exempt real property, including the debtor’s homestead, it can be difficult to persuade a title company that they should ignore any judgment. A title company’s automatic, self-serving reaction is usually to require that all liens be cleared. The homeowner should resist this pressure and insist on his or her homestead rights.
As is true with other liens, the first step in the process under the new law is a demand letter—in this case, a 30-day letter to the judgment creditor and its attorney. If there is no response, Property Code Section 52.0012 provides that a judgment debtor may file a “Homestead Affidavit as Release of Judgment Lien” which “serves as a release of record of a judgment lien established under this chapter.” The affidavit must be in proper form, meeting all requirements of the statute. However, if the judgment creditor files a contradicting affidavit, and if after filing such a contradicting affidavit a purchaser or mortgagee of real property acquires the purchaser’s or mortgagee’s interest from the judgment debtor, then the debtor’s affidavit does not act as a release of the judgment lien with respect to the purchaser or mortgagee. If the process is followed step-by-step, then the affidavit which the debtor files may be accepted by title companies as release of the judgment lien against the homestead. Nothing in the applicable law forces a title company to do anything.
Statutory Process under the New Law
The following is a checklist for evaluating whether or not the Section 52.0012(c) procedure applies in a particular case. Generally speaking, a title company will not insure over a homestead lien using the new law unless:
1. the abstract of judgment is abstracted after September 1, 2007;
2. a 30-day demand letter has been sent by CM/RRR to the creditor and its attorney enclosing a copy of the affidavit that is intended to be filed, with evidence of homestead status included;
3. proof exists (e.g., a signed USPS green card) that the creditor and its attorney received the letter and affidavit at least 30 days prior to the date that the affidavit was recorded;
4. the title company’s plant is certified to the 31st day following the mailing of the letter and affidavit;
5. no contradicting affidavit is recorded by the creditor;
6. the size of the property does not exceed 10 acres, if urban, or 200 acres, if rural (100 acres if the debtor is single); and
7. the proposed purchaser or lender is a bona fide third party, paying money for or lending money against the property.
Judgment Creditor Response
The judgment creditor has a couple of options. There is nothing in the statute that requires the judgment creditor to do anything. The creditor can choose to take no action at all and usually suffer no consequences. However, potential liability could arise if the abstract actually obstructs or delays the sale of the debtor’s exempt homestead. Property Code Section 52.0012(c) states that a judgment lien does not attach to, and does not constitute a lien on, a judgment debtor’s exempt real property, including the debtor’s homestead. If the subject property is clearly indicated to be residential homestead in the records of the county where it is located, the path of least resistance for a judgment creditor may be to execute a partial release of that property from the judgment lien—and then live to fight another day as to property that is non-exempt.
Alternatively, the creditor can (if grounds exist) choose to be pro-active and file an affidavit contradicting the one filed by the judgment debtor. Section 52.0012(d)(2)(e) provides that the debtor’s affidavit “does not serve as a release of record of a judgment lien . . . with respect to a purchaser or mortgagee of real property that acquires the purchaser’s or mortgagee’s interest from the judgment debtor after the judgment creditor files a contradicting affidavit.” What happens if the creditor files such a contradicting affidavit? The judgment debtor’s affidavit is stopped in its tracks, and the whole matter—you guessed it—heads to the courthouse.
In order to avoid possible liability for filing a false affidavit, however, a judgment creditor would need to have some plausible grounds for the contradicting affidavit, something more than mere unsubstantiated belief.
The Flaw in the Process
From the point of view of the judgment debtor, there is a flaw in the process since there is nothing in the statute that requires a title company to accept the statutory affidavit and then go forward with closing and issuing one or more title policies. In other words, the law is not self-enforcing. Title companies, being conservative institutions, may hesitate or refuse to go along, which can be a disappointment to a seller (and his or her attorney) who have diligently followed the provisions of the lien removal statute. A title company determined to avoid potential liability may simply claim that one’s affidavit is unacceptable to them—and not even explain why, which has happened to this author more than once. What the title company is really saying is that even if the statutory affidavit were inscribed on a tablet of gold by the best lawyers in Texas, they would not accept it, for reasons of their own. As in other situations, it may be necessary to shop title companies until one is found that is amenable to this process.
Expectations of Judgment Debtor Clients
The usual question from a homeowner is “Can you get this lien against my homestead released?” The expectation is that the attorney will obtain a release of lien that when recorded will conclusively, as a matter of fact and law, permanently remove the lien. Attorneys must be careful to manage the client’s expectations in this regard. The statute does not provide for a traditional release of lien. It provides for a “Homestead Affidavit as Release of Judgment Lien” which only serves as a release if a title company agrees that it does. That is a critical difference. Accordingly, the attorney must be careful not to guarantee any particular outcome—only that the statutory notice and affidavit process will be followed. In turn, the client must accept the potential limitations on the process.
What does the attorney need from the client?
When asking that an attorney initiate the process of removing a lien from the homestead, the client should be prepared with a number of items: (1) a copy the abstract of judgment (if a copy of the judgment itself is available, supply that as well); (2) a copy of the warranty deed to the homestead; (3) a print-out from the local appraisal district indicating that the property is classified as homestead (sometimes there is a notation that it is “HS”); (4) the name and address of each judgment creditor and/or its attorneys; and (5) correspondence between the judgment creditor and the client.
Note item (4). Clients often expect a lawyer to be able to locate their creditors as part of the lien removal process. This may not be a reasonable assumption, since lawyers are not usually also private investigators. Demand letters may be returned labeled “no such address” or the like. If an investigator is needed, the client should be prepared to bear that additional expense.
By now it should be clear that a lawyer cannot offer any guarantees relating to the removal of liens from the homestead—either guarantees that negotiations with a creditor will be successful (in the case of pre-9/2007 liens) or that a title company will accept a statutory affidavit as a release of lien (in the case of post-9/2007 liens).
Information in this article is provided for general informational and educational purposes only and is not offered as legal advice upon which anyone may rely. The law changes. Legal counsel relating to your individual needs and circumstances is advisable before taking any action that has legal consequences. Consult your tax advisor as well. This firm does not represent you unless and until it is expressly retained in writing to do so.
Copyright © 2019 by David J. Willis. All rights reserved worldwide. David J. Willis is board certified in both residential and commercial real estate law by the Texas Board of Legal Specialization. More information is available at his website, www.LoneStarLandLaw.com.