Dear Mr. Gisriel: If a creditor wins a judgment against the owner of a property, but I have a contract to buy the property, will the judgment affect my purchase?
Dear Mr. Coyle: The quick answer is you can go ahead and buy the property; once you have a contract on a house that is free of liens, you have a right to buy the property, even if liens are placed on the property before the deal goes to settlement.
But first a little lesson on title.
"Legal title" -- in ordinary parlance, this is called ownership -- is obtained for a house or piece of property only when a properly executed and notarized deed is recorded in the public land records in the county or political subdivision where the house or property is located. This deed would then give title to the buyer.
The deed would have priority against all other would-be claimants to the house or property even if the other claimants also had valid deeds for the same house or property and those deeds were either unrecorded or recorded after the other deed.
"Equitable title" refers to the legal or enforceable right to eventually obtain legal title. Equitable title can be obtained by receiving a fully executed contract or a fully executed but unrecorded deed to a house or piece of property. Equitable title is therefore not as strong as legal title.
A buyer has equitable title once a sales contract has been accepted -- and signed -- by the seller, even if certain contingencies remain on the contract.
Anyone, therefore, holding equitable title to a property should quickly take the necessary steps to convert to full legal title.
A creditor or other person with a judgment against a seller who places a lien after the buyer obtains equitable title -- for example, after a sales contract is signed -- cannot seize the property even though the lien is still good against the legal title owner, that is, the seller, and even though a new deed giving full title to the buyer had yet to be recorded in the land records.
Of course, a creditor can still pursue other legal action against the seller, but not against the house.
Pub Date: 4/28/96