Ask the Underwriter

By: Laura Treu, Vermont State Counsel and Aaron Monahan, Underwriting Bridge Associate

Q: I have a judgment lien that has been of record for 9 years. There has been no renewal or release. What do I have to do?

A: The answer to the question will boil down to what type of lien it is.

If it is a Vermont state judgment lien, the lien is enforceable for eight years from the issuance of the final judgment. After that time period, it must be renewed within the initial eight-year window. See generally 12 V.S.A. §§ 2901, 2681 and 506. Further, as of now, there are no limits to the number of extensions that can be filed for State judgment liens. See generally 12 V.S.A. §§ 2901, 2681 and 506.

If the lien is based on a federal court judgment, the lien is good for twenty years upon the filing of the judgment in the land records. It can be renewed once for an additional twenty years but must be renewed during the initial 20-year period. For priority purposes, a renewal relates back to when the judgment was in initially filed in the land records. See 28 U.S.C. §3201.

If the lien is a federal tax lien, then the lien is good for ten years from the date of the assessment of the taxes and can be renewed by the IRS for an additional ten years. A a “Notice of Extension” must be filed in the town land records where the property is located before the original lien expires. See generally I.R.C §6323(g); and Vermont Title Standard 23.1.

In summary, depending on the type of lien and whether a renewal has been properly recorded, you may or may not need to clear the lien.

Q: Does a federal tax lien attach to real property held by a married couple under tenancy by the entirety when that federal tax lien is against only one of the spouses?

A: While it is true that a creditor cannot attach property held as tenants by the entirety and owned jointly by a debtor and a non-debtor (See RBS Citizens, N.A. v. Ouhrabka, 30 A.3d 1266, 190 Vt. 251, 2011 VT 86 (2011)), a federal tax lien is the exception to that rule. See United States v. Craft, 535 U.S. 274 (2002). In Craft, the US Supreme Court held that a federal tax lien attaches to all the property, and rights to the property, of the debtor even when held as tenants by the entirety and regardless of state law otherwise protecting the non-debtor spouse. See also Vermont Title Standard 23.1.

Unless the federal tax lien is outside the statute of limitations, it is still applicable and must be dealt with in sale, purchase or refinance situations even if assessed only against one spouse.

The information contained in this document was prepared by First American Title Insurance Company (“FATICO”) for informational purposes only and does not constitute legal advice. FATICO is not a law firm and this information is not intended to be legal advice. Readers should not act upon this without seeking advice from professional advisers.

First American Title Insurance Company makes no express or implied warranty respecting the information presented and assumes no responsibility for errors or omissions. First American, the eagle logo, First American Title, and firstam.com are registered trademarks or trademarks of First American Financial Corporation and/or its affiliates.