Will judgment against previous owner rendered AFTER property sale, prevent future mortgage?

[Anonymous]

An erroneous court judgment was recorded against a property owner for failure to perform repairs, creating a city claim against that property.  But this judgment came about six months AFTER the house had already been sold to another party via quit claim deed.  (The trial that created the default judgment took place six months after the sale.)  Will this new buyer have difficulty selling his house, because future mortgage banks will have a problem with this judgment?  The erroneous judgment has to do with the fact that the original owners of the house did in fact complete the required repairs, with proof of satisfactory completion from the city inspector, way before the court date, but the court was not informed of it. Again, will a title search on this property prevent a mortgage, given that this judgment was rendered against the previous owners half a year AFTER the house had already transferred to the current owner?

[Anonymous]

I would check, but it sounds like something the title insurance would cover?

[ShanetheMortgageMan]

Sounds like a weird one - I guess my question is the judgment against the previous owner specifically, or is it against the "owner of the home", and if it's against the "owner of the home" is it the owner of the home on a specific date, or just the current owner of the home?  If it's the "current owner of the home", because whatever repairs that the city requested were not completed at all, and now they are finally coming after the owner, it sounds like the current owner's might be on the hook.  Title insurance company would definitely be one I'd be calling on this.

[GregB]

OP stated "sold to another party via quit claim deed". Probably means NO new title insurance. Is there no new financing?

[ShanetheMortgageMan]

The lender title insurance is usually in effect for the life of the mortgage, not respective to who the current owners are... so if that's still in place perhaps it'd be covered.  The owner's policy I believe is only in effect for the owners at that time from my understanding.  Title insurance company can clear the coverages up.

[Anonymous]

Thanks for bringing the role of the title insurance company to my attention. Slipped my mind. When the property was transferred from the original owners to the current owner by quit claim deed, the purchase price was paid in cash, without financing. There was no title insurance taken by the buyer at that time, but then again the property was free and clear of any liens at the time of his purchase. The judgment came only half a year later, clearly a city court mistake. The worry is that a future buyer of the property may not be able to get a mortgage because of this past judgment. It is not clear from the wording of the judgment whether it is against the owners only, against the property only, or against both, or whether it extends to future owners, or whether it attaches  to the property as a fixed lien, surviving into the timeline of new owners, etc. It simply says that the fine being rendered is X amount of dollars, and that that X amount of dollars must be paid to the city from any income produced by the property. A real mess, given that the repairs were diligently performed and completed before the building inspector's deadline. Thanks for your ideas, and if you have any more thoughts, please post.

[ShanetheMortgageMan]

I'd contact the city to see if they realize the person they put the judgment against no longer owns that home, and see what they say.

[Anonymous]

You also need to find out WHO failed to get the repairs recorded.  If the owners assumed (as often happens) that once the repairs are done the deal is over, they would still be liable.  If they reported the repairs properly and/or the property was re-inspected, then you should be able to get the issue fixed.   

If the past owners failed to finish this, then the current judgement is probably valid and could possibly be held against any current or new owners.  And I am not sure title insurance would cover the fact that a judgement was issued after the sale of the home since they can only research past actions.  It is a good question for title insurance, but probably not in this case since the house was a cash purchase.

[MattH]

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@Anonymous wrote:
An erroneous court judgment was recorded against a property owner for failure to perform repairs, creating a city claim against that property.  But this judgment came about six months AFTER the house had already been sold to another party via quit claim deed.  (The trial that created the default judgment took place six months after the sale.)  Will this new buyer have difficulty selling his house, because future mortgage banks will have a problem with this judgment?  The erroneous judgment has to do with the fact that the original owners of the house did in fact complete the required repairs, with proof of satisfactory completion from the city inspector, way before the court date, but the court was not informed of it. Again, will a title search on this property prevent a mortgage, given that this judgment was rendered against the previous owners half a year AFTER the house had already transferred to the current owner?

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By the close of business tomorrow you absolutely must have spoken with (1) any title insurance company involved and (2) a good real estate lawyer.  For something like this you need expert advice and you need it now.