ENFORCEMENT OF JUDGMENT ON RESIDENTIAL PROPERTY-HOW TO ATTACH AND SELL A FAMILY HOME
As discussed in other articles, obtaining a judgment from a court of law allows one to obtain a writ of execution which directs the local sheriff to attach assets of a judgment debtor who does not voluntarily pay. Using such a writ, one can seize personal property, automobiles, wages, business interests and real property. The procedure for attaching and having a judicial sale of real property is complex but given the value of real property in California, one of the best ways to achieve judgment.
The Courts, however, have imposed additional protections if the property sought to be sold as judgment enforcement proceedings is the residence of the judgment debtor. In an effort to “protect families” the Courts require that the judgment creditor petition the court to allow the sale, unlike the automatic right to enforce the writ available for other assets of the judgment debtor. This article describes the basic procedure necessary to enforce a judgment against a family home.
The Basic Process:
Proceeding with an execution sale of real property is a lengthy process, which can easily take six months to complete. Even then, if the judgment creditor does not receive a bid at the execution sale which exceeds the number of liens and encumbrances on the property and exceeds 90% of the fair market value, then the sale will be canceled, the execution lien will be removed, and the judgment creditor will be prevented from obtaining a subsequent court order to sell the property for a period of one year. Thus, the process must be carefully planned and implemented.
A. Create a judgment lien
The creditor records a copy of the abstract of judgment and certified copy of the judgment with the recorder’s office of the county in which the property is located. This acts as an automatic lien on the property and the property normally cannot be transferred without paying off the lien.
Note that if the judgment debtor only owns a portion of the property, only the judgment’s debtor’s interest is subject to the judgment lien.
B. File Writ of Execution
In California, money judgments are enforceable by a writ of execution.
In order to enforce the judgment lien, the judgment creditor must obtain a writ of execution, levy and then sell the real property at an execution sale. Provided that the writ of execution is levied while the judgment lien is in effect, priority of the execution lien relates back to the date that the judgment lien was created.
C. Due Diligence
Before the judgment debtor’s main dwelling/real estate interest may be sold at an execution sale, the judgment creditor must obtain a court order for the sale of the property from the county in which the property is located. The application for the order must be filed within twenty days of receipt of notice that the property was levied. Code of Civil Procedure section 704.750(a). As such, some preparatory work needs to be completed before levying the property so that the application can be filed timely.
1. Obtain litigation guarantee
A litigation guarantee for the property should normally be obtained from a title company. The guarantee will contain a legal description of the property, the names of the current owners and a list of all deeds of trust, abstracts of judgments, tax liens and other liens recorded against the property.
The judgment creditor should also request whether a declaration of homestead was recorded and whether a current homeowner’s exemption or disabled veteran’s exemption has been filed with the county
2. Appraisal of the property
The property should be appraised by an independent appraiser.
3. Determine amount of liens
The judgment creditor must determine the amount of all liens and encumbrances on the property. The names of lienholders can be obtained from the litigation guarantee. Then the judgment creditor can ascertain the precise amounts of obligations secured by senior lien holders by making a written demand for beneficiary statements from the senior lienholders under Civil Code section 2943. Under section 2943, the senior lien holders must provide the requested information within 21 days after receipt of the demand.
4. Determine equity in property
After obtaining the litigation guarantee, appraisal and determining the value of all liens, the realizable equity in the property can be determined by subtracting from the property’s fair market value the amount of the liens and encumbrances plus the amount of the applicable homestead exemption.
If there is no realizable equity, the sale may not be completed. All senior liens and encumbrances must be satisfied by the highest bid at the execution sale or the sale will not go through and the property is released. More on that below under Section F.
D. Levy the property
When the judgment creditor is then ready as described above, it is time to forward with the levy, and the Sheriff’s office of the appropriate county then serves the notice of levy.
The judgment creditor must provide written instructions to the levying officer including the following information:
(1) An adequate description of any property to be levied upon.
(2) A statement whether the property is a dwelling.
(3) If the property is a dwelling, whether it is real or personal property.
(4) The name of the judgment debtor. If the judgment debtor is other than a natural person, the type of legal entity shall be stated.
Code of Civil Procedure section 687.010. There will be a fee and it varies depending on the county, but expect it to be no less than five hundred dollars. Then the judgment debtors and all other title holders are served with the levy papers, which the Sheriff’s office will complete as part of their fee.
E. Apply for order for sale of the property
Within twenty days after the property has been levied, the judgment creditor must apply for an order for the sale of the property. The application must contain the information obtained on the four points discussed above under “Due Diligence,” including a declaration as to the property’s fair market value since the value will determine the minimum bid at the sale.
The court must set a hearing date no later than 45 days after the application is filed. Code of Civil Procedure section 704.770(a).
F. Execution sale
For property held in joint tenancy or tenancy in common, the execution sale will only apply to the portion belonging to the judgment debtor. Additionally, any bid for the property must exceed all liens and encumbrances and also be 90% of the fair market value of the property. Code of Civil Procedure section 704.800(b). If an adequate bid is not received, the property may not be sold and must be released from the execution lien. Code of Civil Procedure section 704.800(a). Moreover, once the property is released, it may not be subjected to another court order for sale upon a subsequent application from the same judgment creditor for a period of one year. Code of Civil Procedure section 704.800(a). Note that the judgment creditor may be one of the bidders on the property.
Also note that when a property held in joint tenancy is subject to joint encumbrances and only one owner is obligated on the judgment, the property may not be sold unless the bid is sufficient to pay off all of the joint encumbrances (senior to the judgment creditor’s lien) on the property.
Notice of the sale must not be given before 120 days have elapsed since the date the notice of levy was served on the judgment debtor. Code of Civil Procedure section 701.545. Additionally, the notice of the sale itself shall be served no less than twenty days before the sale date. Notice must be provided to the debtor’s, creditor, one public place, and on the real property. Code of Civil Procedure section 701.540.
The legislative effort to protect the family home certainly places procedural burdens on the judgment creditor but that very fact means most creditors do not bother seeking to enforce judgments against such assets and may allow the aggressive creditor a chance for effective collection. It is a prolonged and expensive process and this intimidates many creditors-but that means the creditor willing to take on that burden may be the one most successful.
That said, much homework is necessary before this means of collection is attempted and the wise creditor will plan this carefully ahead of time.