Virtual Underwriter

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Underwriting Manual: SC

10.08.4

Installment Sales Contract - Do Judgments Against the Purchaser Constitute Liens?

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State Supplements

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Another issue that arises occasionally with respect to property encumbered by an installment sales contract is whether a judgment against the purchaser holding only an equitable interest in the real property is a lien on the property.  The Supreme Court of South Carolina addresses this issue in FCX, Inc. v. Long Meadows Farms, Inc., 269 S.C. 202, 237 S. E. 2d 50 (1977).  The court cited several old cases which deal with the issue which held that the buyer's equitable interest is not subject to the lien of a judgment against him.  Roddy and Co. v.Elam, 12 Rich. Eq. 343 (1866) followed the common law rule that the lien of a judgment attaches only to real property in which the judgment debtor has a vested legal interest.

UNDERWRITING GUIDELINE:  A judgment against one holding only an equitable interest in property as a purchaser may be disregarded and no policy exception is necessary.  If the purchaser is to take legal title and owner's policy is to be issued for the purchaser, an exception to the judgment should be set forth in Schedule B.

However, under Section 20-7-1295, a child support lien (Department of Social Services Lien) attached to any interest in real property of the obligor, both legal and equitable.  Therefore, any child support liens against a purchaser should be considered as liens attaching to the real property and a Schedule B exception is taken.  It is uncertain as to whether Federal or State Tax liens would attach to a purchaser's interest in real property and you should contact the District Office should that issue arise.