North Carolina Court of Appeals Confirms Judgments Follow Real Estate After Transfer | Smith Debnam Narron Drake Saintsing & Myers, LLP
As too many judgment creditors know (or sometimes learn quickly), a judgment is often not worth much more than the paper it’s printed on. An important exception, however, is when the judgment debtor owns real estate. In North Carolina, a judgment automatically attaches to any real estate owned by the judgment debtor in the county in which the judgment is entered. In addition, judgments can be “transcribed” in any county within the state where the debtor owns real property, and he or she will become attached to that real estate once it is transcribed. Any subsequent purchaser of the property takes it subject to judgment. In practice, this means that the judgment creditor is often paid out of the proceeds from the sale of real estate to which their judgment relates, much like how a mortgage is paid off when someone sells a house. However, when this does not happen, the judgment creditor can always turn to this property to enforce his judgment.
The North Carolina Court of Appeals upheld the long-standing rule that real property “is not exempt from [a] legal lien by a transfer of the debtor’s title.
In a recent case, the North Carolina Court of Appeals upheld the long-standing rule that real property “is not exempt from tax. [a] legal lien by a transfer of the debtor’s title. In Chisum Construction c. Elliot, the Court of Appeal determined that the court of first instance should have allowed the judgment creditor to enforce real estate that the judgment debtor owned when the judgment was rendered, but which it had since transferred to a third party. The current owner objected to the enforcement by the judgment creditor of the property he now owned, and the trial court held that the judgment creditor’s only remedy was to bring an entirely separate legal action claiming that the transfer of real estate was to be canceled under the voidable uniform transfer. Law (“UVTA”). The Court of Appeal noted that the UVTA is applicable in situations where a creditor transfers an asset to keep certain assets out of the reach of creditors, but that in this case the transfer did not affect the capacity of the judgment creditor. to enforce on the real estate because the judgment had been joined before the transfer. The Court of Appeal also dismissed the current owner’s claim that the performance would somehow violate his due process rights, noting that a land buyer takes it subject to the rights of the senior secured creditors.
“Bidders are at their own risk to find out which higher privileges are registered.”
The Court of Appeal then clarified that if the property in question was sold to satisfy the judgment, the successful buyer would take the property subject to any lien superior to the judgment (such as a first rank trust deed) and cautioned that âBidders are at their own risk to find out which higher privileges are registered. In addition to confirming a powerful judgment collection tool, this case also serves as an important reminder of the need for a thorough title search before purchasing real estate, which may be the subject of other claims. creditors.