The Real Difference Between Judgments & Judgment Liens

Within the industries that require due diligence, it’s common practice for us to receive research requests for UCC, state, and federal tax lien, judgment, pending civil litigation, bankruptcy or criminal searches.

Due to the fact that these searches are standard procedure when dealing with any type of loan, it’s important to know two of the most commonly misinterpreted search terms.

Judgments vs. Judgment Liens

These terms are not synonymous. They mean very different things, which is an important distinction we make with our clients as a service provider.

A judgment is an official decision of the court. It either grants or denies the rights and liabilities of a legal claim resulting from a civil suit. In most instances, the nature of the case could include an official decision of an amount due to the winning party of the case.

Subsequently, a judgment lien could potentially be filed AFTER the court judgment is of record.  Sometimes the prevailing party of a legal court proceeding decides to file a copy of the court judgment at the local level (County Recorder, County Clerk, Recorder of Deeds, etc.). It’s important to note that a judgment lien does not automatically get recorded at the county level.  When the record is filed at the local level it can then become an encumbrance on real or personal property of the debtor. Similar to a Tax Lien, this type of lien is attached without the owner’s consent, unlike a mortgage. A recording of a judgment lien can be made against an individual or business name.

Does this affect my due diligence research?

When requesting a ‘judgment search’, what are you expecting to uncover? A judgment lien? Maybe a judge’s decision from a civil case? Any and all possible results including closed or satisfied cases? Based on your answers to these questions it will help determine where to search and what we can provide as potential results. 

You cannot search only at the court and expect to find both judgments and judgments liens, and conversely, you cannot search at the local filing level and expect to find all judgment liens and judgments. They are not the same kind of record and only searching in one jurisdiction will not reveal everything needed for complete due diligence.

Having a court search conducted (in the appropriate jurisdiction) for civil matters will determine if there are any recent cases that have resulted in a monetary judgment.

When conducting a local filing office search (where real estate is located) on the requested debtor name we will determine if any judgment liens (that have resulted from a civil suit) are attached to the property.

Searches at the court level are necessary to uncover court judgments and pending litigation.  A search at the local filing office is necessary to uncover judgment liens that will be filed on the real estate.

Exactly what you need

When clients request a thorough public record due diligence search, it’s important to us that we confirm whether both court searches (for judgments and pending litigation) and county office searches (for judgment liens) are needed. When assuming what the client needs or wants there is potential to provide inaccurate or incomplete information.

Often times clients are coming to us not knowing exactly what they need and that is perfectly alright. We pride ourselves on being a resource and asking the right questions on the front-end to make sure your end results exceed expectations.

Additionally, as suggested in the past, we always encourage clients to consider what level of risk they are up against in general for their transaction in question and create thresholds based on organizational loan criteria.