Bulletin: UT000020

Dear Associates:

This Bulletin supplements Bulletin UT000018 in light of recent statutory changes, which amends U.C.A. §78-22-1.5 relating to Judgments recorded in the Registry of Judgments. 

JUDGMENTS AFFECTING REAL PROPERTY
In 2002, the Utah Legislature attempted to address problems arising from the failure of the Registry of Judgments to achieve the desired results of effectively standardizing the filing and record system of the consolidated court system.  H.B. 305 (Judgment Lien Amendment) was enacted with an effective date ofJuly 1, 2002.  As of July 1, 2002, entry of the judgment in the district court or Registry of Judgments no longer creates an automatic lien on real property.  The Judgment must be recorded with the county recorder to create a lien against real property.

State agencies are exempt from requirement that judgments must be recorded with the county recorder for a lien against real property to be created. 

COMPANY POLICY: If a Judgment recorded after July 1, 2002, examiners need only check for Judgments by searching in the records of the County Recorder where the real property of the judgment debtor is located.  It is no longer necessary to search for Judgments in Registry of Judgments.  Also, it is no longer necessary to search the civil order registry or to show civil action orders.  If a civil action order is a judgment, it must be recorded in the office of the county recorder to become a lien. 

If a Judgment is entered between July 1, 1997 and 7/1/2002 , examiners must continue to check the Registry of Judgments in each District Court located in the county where the land is located. 

Prior to 7/1/1997 , examiners only need to check for judgments entered by the District Court located in the county where the land is located. 

LIS PENDENS
Either party to an action affecting the title to, or the right of possession of, real property may record a Notice of Lis Pendens with the recorder of the county in which the property or some part thereof is situated.  U.C.A. §78-40-2.  A lis pendens is effective from the time of filing such notice for record and gives notice to all interested parties of a possible interest in the property.  Since a lis pendens is not a lien, the Judgment Lien Amendment does not apply to a Notice of Lis Pendens.

COMPANY POLICY.  If a Lis Pendens appears in the record, the examiner must continue to look at the underlying court file to determine the exact nature of the interest in property.  After determining the nature of the underlying action, the examiner must also obtain a termination of the action or Stipulation.  Do not rely solely on a Release of a Lis Pendens.  Contract your local underwriter if you have questions regarding additional requirements or removal of any lis pendens effecting title to property.

DIVORCE DECREES AND EQUITABLE ORDERS
Under Utah law, an equitable lien may be declared by a court of equity based on the general principles of equity and justice to prevent unjust enrichment.  Under U.C.A. §30-3-5, when a decree of divorce is rendered, the court may include in it equitable orders relating to children, property and parties.  For example, a trial court may create an equitable lien in the divorce decree in favor of one spouse to secure payment of the spouse's interest in the equity of a home.  Donahue v. Donahue, 862 F.2d. 259 (10^th Cir. 1988).  After July 1, 2002, a Divorce Decree or other Order of the Court entered by a District Court becomes a lien against real property only if the divorce decree, judgment or abstract of the judgment along with a legal description of the property is recorded in the office of the County Recorder where the property is located.

COMPANY POLICY: If you are aware of a pending divorce of an owner, always review the divorce and, where necessary, require a release or deed from the other spouse to remove such record interest or lien as may be provided for in the Decree.  It is helpful if such deeds or releases contain recitals referring to the applicable provisions of the divorce decree.  A lien created by such a divorce decree should be considered to be a lien without a termination or self-releasing date.  In the event that such an interest or lien is not being removed, a proper exception should be made in Schedule B. 

After July 1, 2002, a recorded or docketed Divorce Decree or other Order of the Court providing for any payments should be viewed as giving potential notice of a judgment by operation of law.  Additionally, the recorded divorce Decree or Order of the Court may create special obligations or covenants creating a lien or awarding another interest, in addition to vesting title. You should always make a separate requirement on your title commitment for each special obligation or lien on title awarded by the Divorce Decree or Order of Court.  Remember that out of state divorces do not vest title unless you also secure a deed from the other spouse.

IF YOU HAVE ANY QUESTIONS REGARDING THE ISSUES RAISED BY THIS BULLETIN, PLEASE CONTACT YOUR LOCAL UNDERWRITING PERSONNEL.