Judgment against neighbor could impact house sale.
He is now selling his home and I would like to be paid back. He's been at the property for many years and I'm pretty sure he has a fair amount of equity in the property. What can I or should I do to guarantee getting paid back?
We don't speak anymore but I've heard through other neighbors that he is moving quite a distance from here. I'm pretty sure it's now or never for getting paid back.
A. You indicate the loan was made some years back. How many years back? More crucial, how many years ago was the judgment entered? Judgments are good for seven years and they must be revived through a court proceeding to be effective after seven years.
Let's presume your judgment is less than seven years old. Next question is: Was a Memorandum of Judgment recorded in the county where your neighbor's property is located? A Memorandum of Judgment, properly recorded, creates a judgment lien on any property owned by the judgment debtor in the county the memorandum was recorded.
If the Memorandum of Judgment was recorded in the appropriate county, you have a lien on his property that should appear on his title commitment. A title commitment is essentially a search of the seller's property to determine any liens or encumbrances recorded against the property. Any mortgage held by the seller against the property being sold will appear as a lien on the title. Real estate taxes always appear as a lien on the commitment. And, a properly recorded Memorandum of Judgment will appear as a lien against the property.
Presuming your judgment lien is picked up by the title company, the seller will be required to obtain a payoff letter from you. This is a statement from you that indicates the amount of money that you demand be paid to you in exchange for releasing your judgment lien. Failure to negotiate a release of the judgment lien will most likely kill the sale, as the purchaser will not agree to take the property subject to your judgment lien.
Also, don't forget, when computing what is owed to you, you earn 9 percent interest annually on the judgment plus you are probably also entitled to the costs you incurred in bringing the lawsuit.
If a Memorandum of Judgment was never recorded, and the judgment is less than seven years old, you can still prepare a memorandum (the form may be found at the circuit court clerk's website), have it signed by the judge who entered the initial judgment and have it recorded. I would suggest enlisting the aid of an attorney as time is probably of the essence and you want to do this right.
Q. I am selling a few of my investment properties and wish to use Section 1031 of the Internal Revenue Code to exchange these properties for a property or properties that will be closer to where I am moving. My question is this: Can I sell one, two or three rental properties and exchange for a single property? What I'm asking is does each exchange need to be one property for one property or could I exchange three properties for one property if I wish?
A. First, once you decide how you wish to proceed, I strongly suggest you consult with the company that will be acting as your exchange intermediary and run your plan by them. Most of the exchange intermediaries have staff members who have participated in hundreds if not thousands of exchanges and they are an outstanding resource for exchange-related questions.
It is my experience that what you are proposing would qualify as a Section 1031 exchange, so long as each sale and purchase complies with the provisions and restrictions contained in Section 1031. For the basics, we know that once you sell a property, you must identify the replacement property within 45 days of the sale and close on the replacement property within 180 days of the sale.
So, let's say you sell property A on Jan. 1, property B on Jan. 20 and property C on Feb. 1. You could identify the same replacement property for all three sales so long as the replacement property was identified within 45 days of Jan. 1. You would then be required to close on the replacement property within 180 days of Jan. 1. Presuming all other 1031 requirements are met, you should be able to exchange your three properties for a single, like-kind property.
* Send your questions to attorney Tom Resnick, 345 N. Quentin Road, Palatine, IL 60067, by email to email@example.com or call (847) 359-8983.