Keeping child and spousal support liens from derailing your transactions

Keeping child and spousal support liens from derailing your transactions

The list of issues that can derail an otherwise simple real estate transaction—costing buyers, sellers, attorneys and lenders time, money and, possibly, a dream home—is long. While child and spousal support may not be the first thing to come to mind when you think of real estate transactions, it certainly has the ability to unravel a deal. Here are some things to watch for and ways to deal with issues that arise.

Unpaid child support can lead to a tax warrant filed by the New York State Department of Taxation and Finance (“DTF”). That warrant allows DTF to seize and sell real property, creating a title defect.

The good news—if you are a buyer or lender—is that the warrant is a public record, making it discoverable during a title search. To remove the lien so that the debtor’s property is unencumbered and ready for sale, the debtor must pay the bill in full and make sure that the proper state agency and county clerk are notified.

While a check of the New York State Department of State (“DOS”) online database can reveal many warrants, there is a gap between the filing of the actual warrant in the county clerk’s office and the filing of the notice at DOS. As a result, a title company will rely on searches conducted in the office of the county clerk to determine the most recent filings against a given debtor.

If there’s a lien on property the debtor wants to sell, the debt must be paid in full with guaranteed funds. Once that payment is made, DTF can issue a Notice of Pending Warrant Satisfaction. OneTitle will generally accept this notice as proof the lien will be removed as long as funds are set aside in an escrow account until the final number is verified. Then, DTF will notify the Department of State and the County Clerk, which will show that the tax warrant is satisfied and remove the lien against the subject property.

Please feel free to contact our underwriting team with any specific questions about this or any other issues you face.