Many lawsuits are brought in the hope of recovering money to compensate for injuries. Seems simple enough. Yet, the judicial process can be long, tedious, expensive and overwhelming. Winning the case and getting paid each has its own challenges and pitfalls, and there are limits to what a creditor may do to get paid, and how long a creditor may have to chase after assets. In particular, real property. Here, we briefly examine the process of extending the life of a judgment as a lien against the defendant’s real property. If done correctly and timely, the lien can last 20 years. The process begins after the plaintiff wins the case and damages are awarded as compensation.
The first step is to turn the award into a “judgment” adjudging the plaintiff as the prevailing party, fixing the amount the defendant must pay as compensation, and declaring that the plaintiff may proceed to enforce the judgment against the defendant’s assets, be they land, cash, stocks, or any other property. We note that post-judgment interest, by statute, accrues at the rate of 9% per annum.
The next steps are to docket the judgment in the office of the clerk for the county where the action was brought, and to file transcripts of the judgment in any other counties where the plaintiff believes the debtor owns property. Once this is accomplished, the plaintiff – the judgment creditor – has secured a lien against all real and personal property owned by the judgment debtor, which may be levied against and sold at public auction to satisfy or reduce the amount of the judgment.
Judgment debtors, however, don’t generally hand over their assets, or tell their creditors where to find assets. Therefore, a creditor must embark on a long and tedious journey to find real and personal property to satisfy the judgment. These post-trial proceedings are aptly called “collection proceedings” or “supplementary proceedings.”
How long does a creditor have to locate assets? How long is the judgment good for? With these questions in mind, we addresses the process of maintaining a judgment lien specifically against a debtor’s land – real property.
Under §211(b) of New York’s Civil Practice Law and Rules (“CPLR”), a judgment is good against a debtor’s assets for 20 years, subject to certain exceptions. A creditor may feel somewhat optimistic, having 20 years to locate assets. But there is a procedural glitch when it comes to real property.
CPLR §5203(a) provides that, as against real property, the judgment remains a lien for only 10 years. There is no clear reason for this anomaly, but it exists and creditors must be aware of it.
A sophisticated and well-counseled judgment debtor would likely be aware that a judgment lien against real property has a limited lifespan. Once the lien expires, the real property may be sold or mortgaged without satisfying the judgment.
Clients tend to be anxious to start actions to recover judgments against defendants, only to discover at the end of a case that their judgment is not, as they say, worth the paper it’s written on. The defendant may have no equity in real property or may not own other assets, and is, therefore, judgment proof. So too, there may be mortgages recorded against the debtor’s real estate, and other judgment creditors may be looking for assets to satisfy their own judgments. A married debtor likely owns real property with his or her spouse as a “tenant by the entirety.” By law, a judgment creditor cannot force a sale of a spouse’s interest in real property held in a tenancy by the entirety, and a sheriff’s execution sale of only the debtor’s interest in a tenancy by the entirety would not provide any immediate relief. The creditor must wait until the marriage is dissolved by either a divorce, or the death of the non-debtor spouse. If the debtor, however, predeceases the spouse the entire interest in the real property passes to the surviving spouse, and the creditor is out of luck
So too, as time marches on, 10 years may pass without any success in satisfying the judgment. Thankfully, the CPLR does provide a mechanism to extend the judgment lien against real property for an additional 10 years.
Under CPLR §5014 the creditor may, as they say, “sue on the judgment” and obtain an “renewal judgment,” thereby preserving the lien for an additional 10 years. What makes this procedure challenging is having to avoid a time gap between expiration of the initial 10-year period and the moment the renewal judgment is entered and docketed. To provide continuity of the lien under §5014, an action on the judgment should be commenced, at a minimum, about a year before expiration of the initial 10-year period so that a renewal judgment may be entered and docketed before the 10-year period expires. The additional 10 years will then be tacked on to the life of the judgment lien. CPLR §5014 states, in relevant part, that the “[t]he lien of a renewal judgment shall take effect upon the expiration of the ten years from the first docketing of the original judgment.” Id.
While it may seem premature at the time a judgment is first entered, creditors and their attorneys must diary the 10-year expiration date, and diary sufficient time to make application for a renewal judgment – at a minimum one year before the expiration of the judgment. It cannot be overstated: as time marches on, judgment creditors and their attorneys would be wise to fix reminders to take appropriate action to preserve their rights to maintain their judgment liens.
This tedious post-judgment procedure begs the question: why would a creditor spend good money after bad to obtain a renewal judgment after many years have passed without satisfaction?
Practically speaking, an action for a renewal judgment is relatively simple to commence and litigate. It often catches a debtor off guard who is sanguine that his or her real property will avoid enforcement proceedings once the initial 10-year period expires. So too, the value of a debtor’s real estate could change over time. Mortgages can be paid off or substantially reduced within the initial 10-year period of thereafter, thereby exposing equity in real property to enforcement proceedings. Also, other judgments may lapse, paid off, reduced, or vacated, thereby providing equity for enforcement.
Failure to obtain a renewal judgment would free a debtor to mortgage or sell real property without paying off a judgment once the initial 10-year lien has expired. The renewal judgment, therefore, is effective to preserve a judgment lien against real property, provided all procedural details are followed.
Recently, our firm brought three separate actions to obtain renewal judgments, and was able to recover over $250,000.00 against two different debtors, and to prevent a sale of real property by a judgment debtor who thought, wrongly, that she was free of our client’s judgment lien.
By way of disclaimer, we do not discuss here the impact of bankruptcy proceedings or a debtor’s fraudulent attempt to transfer or secrete assets, which are governed by separate laws and procedures beyond the scope of this article.
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