After a court orders a judgment in a civil case, a judgment lien is one way to pressure a debtor to pay up. Judgment liens on real estate are controlled by A.R.S. § 33-964 in Arizona.
A.R.S. § 33-964 – Judgment Liens
To attach the lien, the creditor must record in the county recorder’s office where the debtor owns property. A.R.S. § 33-964(a) provides that the judgment lien will stay in effect for a period of five years, whether the property is owned by the debtor or transferred to another party. That five year period can also be extended for additional five year periods by renewal and recording as provided for in A.R.S. § 12-1613. Judgment liens filed by the state of Arizona or liens for child support under A.R.S. § 25-500 stay in effect until they are satisfied or lifted.
Judgment liens can be limited by other liens the encumber the property, foreclosure proceedings or the homestead exemption, codified in A.R.S. § 33-1101.
The Arizona Homestead Exemption
Arizona’s Homestead Exemption is an important limitation on judgment liens on real property. A.R.S. § 33-1101 provides that every person age 18 or over who resides in Arizona may hold a residence that is exempt from attachment, execution, and forced sale, and can protect equity not exceeding a value of $150,000.
Only one homestead exemption may be held by a married couple or a single person. The property claimed as a homestead must be either a mobile home (including the land upon which it resides), a condominium or cooperative, or an interest in a dwelling house. The person must reside in the property to claim it as a homestead.
This exemption is an important factor to consider for a judgment creditor. Depending on the value of the property, a judgment lien may not have much value after the effect of the exemption. A.R.S. § 33-1102.
If the debtor’s equity in the real property is less than $150,000, the creditor cannot force a sale or get any value out of the judgement lien. But what if the debtor has more than $150,000 in equity?
The creditor still cannot force a sale in some cases. A.R.S. § 33-1103(A) provides that a homestead is exempt from process and from sale under a judgment, with certain exceptions. One exception is if a judgement or lien may be satisfied from the equity of the debtor exceeding the homestead exemption. The forced sale must cover the full homestead exemption, liens senior to the judgment lien, and a portion of the judgement lien. Otherwise, the creditor cannot force the sale.
Chernoff Law handles real estate litigation cases in Scottsdale and throughout Maricopa County. Contact us today to discuss your business and real estate issues.