Forcing the Release of an Improper Real Estate Lien

Liens may be imposed on your property for a variety of reasons. You may have permitted certain liens to be filed, such as your mortgage. Other liens—such as judgment liens, mechanic’s liens, or tax liens—are filed on your property without your consent.  Sometimes you will disagree with a non-consensual lien.

Arizona law provides several ways to remove property liens. Whether a lien was filed in error, is a matter of dispute, or simply was not withdrawn when paid, you options to clear title when it cannot be accomplished cooperatively are generally a quiet title action or a special action under A.R.S §33-420.

Quiet Title Actions in Arizona

A.R.S § 12-1101 authorizes a quiet title action can by anyone having an interest in real property against anyone claiming an adverse interest. A quiet title action is typically brought to simply clear the title.  It results in a judgment barring the named defendant, usually the lienholder, from ever again asserting the adverse interest.

However, the plaintiff should be careful about going directly to a lawsuit.  If the defendant appears in the lawsuit, acknowledges the lien is an error and disclaims all of their rights to any interests in the title adverse to the plaintiff the defendant is entitled to recover costs from the plaintiff. A.R.S §12-1103(A).

A plaintiff can avoid this problem by sending a demand letter to the defendant that satisfies particular statutory requirements. The letter must request the defendant disclaim their interest in the title, and give them twenty days to comply. If a defendant fails to comply, then they will not be entitled to costs if they later disclaim their interest.  The letter also trigger the possibility for the plaintiff to recover attorney fees.  A.R.S. § 12-1103(B).

A party filing a quiet title action may need to file a lis pendens, which effectively notifies all third parties that there is a dispute related to the title. A lis pendens should be filed in situations where an adverse title interest could potentially be transferred to a third party. If a lis pendens is filed, then all future recipients of a title interest would be on notice of the pending claims, and in most circumstances will hold any transferred interest subject to the outcome of the quiet title lawsuit.

A quiet title action can be barred by the statute of limitation in some cases. The general rule is that the statute of limitations does not run against a plaintiff that holds undisturbed possession of the disputed property. However, those who claim an interest, but do not hold undisturbed possession of the property, will be subject to the applicable statute of limitations.

In Rogers v. Bd. of Regents of the Univ. of Ariz., 233 Ariz. 262, 311 P.3d 1075, (App. 2013), the Board of Regents of the University of Arizona (ABOR) constructed a gate on its land that blocked the plaintiff’s access to his property. The plaintiff sought an action to quiet title, but was barred by the one-year statute of limitations for actions against public entities under A.R.S. §12-821.

The court stated that because the plaintiff was asserting an adverse claim against ABOR’s title, and he was not in possession of the disputed property, he was subject to the statute of limitations and had to file within the limitation period. This distinction makes it critical to file a quiet title action as promptly, particularly if you are not in possession of the disputed land or if there is an open and known dispute of your rights. On the other hand, the statute of limitations may also provide property owners with an affirmative defense against adverse claims in their property that are old and have become stale.

Additional Claims Under A.R.S §33-420

An additional method for property owners to remove liens can be found in A.R.S. § 33-420. This statute has the added benefit of allowing the aggrieved party to seek damages.  Persons who file liens that are forged, groundless, contain material misstatements or false claims, or are otherwise invalid, can face a liability of $5,000 or “treble the actual damages caused by the recording, whichever is greater, and reasonable attorney fees and costs of the action.”

The statute provides another sanction for those who fail to comply with a demand letter requesting that a wrongful lien be released. The defendant will be liable for $1,000 or treble actual damages, plus attorney fees and costs, if he or she fails to comply with the demand letter within twenty days.

These penalties can often be enough to convince a wrongful lienholder to either release the lien or negotiate a settlement. Depending on the situation, a demand letter under A.R.S. §33-420 or quiet title demand letter may all that is needed to get a lienholder to release their interest in your title.  If a formal demand does not resolve the matter, then the statutes provide a roadmap for pursuing necessary litigation.

Source: Chernoff Law Firm