QUESTION
My company files and records deed of trusts on properties. One property was sold without us reconveying the DOT first. Why did this happen?
Asked on May 25th, 2023 on Construction Law - California
More details to this question:
I work for a company who does pre-sale home renovations - we are a general contractor licensed in CA,FL,TX. We defer our payments for the work done for up to 1 year and allow the homeowners to pay us back once the home sells out of escrow. To secure the amount of the project we require the homeowner to sign/notarize a deed of trust. We record each deed of trust with the appropriate county. We had one home sell in Los Angeles without us reconveying the deed of trust first. My question is, why was the home able to sell without us reconveying the deed of trust? Is there something we are missing? We assumed the deed of trust would stop the sale of the home in its tracks. Please advise on why this happened and what we should do moving forward.
1 ANSWER
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The deed of trust recorded creates a lien on property. The sale of the proprety will not remove the lien (its effect will continue until it is released). Most sales involve new financing. When a financing occurs , the new lender will require a clear title to exist before funding the loan. If the sale does not require a new financing, then the buyer of the property takes title subject to the existing liens of record. We would recommend asking a title company to provide a history of the sale transaction and providing a copy of all liens of record (which will not only show you the status of the title of the property but confirm your lien is of record.) Once this information is confirmed, you can make a demand for payment against the new buyer for payment. If there is no response, you can initiate a foreclosure action (either by power of sale or throgh the court system).
Answered on May 26th, 2023 at 7:41 AM