Real Estate is a great (but difficult) asset to pursue in a judgment enforcement case. Commercial real estate will not be talked about here, and it is actually a simpler process than residential real estate and we my write about it later. However, any real estate where a human being lives, is called a “dwelling” (C.C.P 704.710) Anytime a creditor attempts to levy and sell a place where a person lives, whether it’s a house, duplex, or apartment building, an Application for Sale will likely be necessary, and Homestead Exemption laws (potentially) come into play, and make the process highly technical and difficult. Timing of the application for sale is governed by C.C.P. 704.750. Contents of the sale application appear in C.C.P. 704.760. Timing requirements for the Sale Application appear in C.C.P. 704.770.
Homestead Levies
The homestead exemption (C.C.P. 704.730) is simply a certain amount of equity in any house where a Debtor lives** which is protected from Creditors. This amount varies from County to County, and if there is not enough equity in the property taking into account:
*All mortgages which are senior to the judgment creditor; and
*Debtors Homestead Exemption Amount (whatever that is),
such that, the creditor gets paid at least $1.00, then the levy will fail, and creditor will be out hours and hours of time, thousands in fees and expenses. (C.C.P. 704.780)
Also, at a hearing on a homestead levy, the fair market value of the homestead will be determined at the hearing (through appraisal evidence usually) (C.C.P. 704.780) If, at auction, a bid is not received which is at least EQUAL TO OR GREATER THAN 90% OF THIS FAIR MARKET VALUE- the levy fails and Creditor is out its time and money. (C.C. 704.800)
These requirements very often make homestead levies fail, and navigating homestead levies is not for the faint of heart.
Non-Homestead Levies:
Levying a residence that is NOT a homestead has a much higher success rate. If at all possible, creditor should do his or her very best to prove that a dwelling is not a homestead. This is done through Debtors Examinations, as well as good old fashioned investigation. To discover if a Debtor lives in a place, consider
*Staking the place out with an investigator
*Sending a process server there with papers to serve the debtor, and see who lives there
*Running license plates of cars in driveway
*Having your process server or investigator do a USPS Postal Verification for you
If the creditor suspects a house is not a homestead, all of these should be done PRIOR to a sale application, because when the debtor comes back and claims the house is a homestead- you may not have sufficient time to do due diligence and get it before the Court.
The upshot:
There are some, maybe a fair amount even, of judgment collection actions that non-experienced practitioners and creditors may be able to do. Real Estate levies are not one of them. There are many things to go wrong and many ways to fail- the Courts don’t often see them and are not very experienced with them, and worse, if you are levying a homestead- the Court is going to look for every reason not to put a debtor out of house and home. (There is even case law to this general effect.) In the words of a colleague: “My advice to people who want to levy and sell real estate to enforce judgments is, don’t do it. Hire a professional.”
Collection Attorneys in Los Angeles since 2011, The Evanns Collection Law Firm has been enforcing judgments for years, and we keep up with the ever-changing laws (which tend to make it harder for creditors and easier on debtors). We have been enforcing judgments in Los Angeles since 2011, and would love to hear about your judgment collection. Call at 213-292-6888. Phone calls are always free.
**Big Caveat: Debtor must have lived in this residence at the time when the creditors lien attached; AND must have resided there continuously until the date of the homestead hearing. C.C.P. 704..710(c) There is quite a bit of case law on this code section (Example, what happens debtor moves away “temporarily”? What happens when debtor is a world traveler and only lives at his ‘homestead’ a few months here and a few months there? If Debtor is in prison, has he “moved out” of his homestead?