## Closing Plan — Halberd Hotel / Judgment Lien ### Summary The judgment lien is a monetary title defect. North Quay should not close Friday on the seller’s proposed $300,000 lawyer-side holdback. The only workable path is: 1. Give written notice today. 2. Invoke the five-business-day cure extension. 3. Obtain a current written payoff from the judgment creditor. 4. Cure through payoff/release or an insurer-approved 125% payoff escrow. 5. Close only after the title insurer removes the judgment lien exception from both the owner’s and lender’s policies. --- ## 1. Written Defect Notice and Deadline **Deadline:** Closing is Friday. “One business day before closing” is Thursday. To be safe, deliver written notice **today, Wednesday**. The notice should: - Identify the contract and property. - Identify the judgment lien by court, case number, docket/recording reference, and debtor. - State that it is a title defect and a monetary lien. - Demand cure. - State that closing is extended under the contract for the five-business-day cure period. - Reserve all rights, including termination, deposit recovery, and specific performance if appropriate. Send it to the seller’s counsel and all notice addresses required by the contract, with copies to the title company and lender. --- ## 2. Five-Business-Day Cure Extension The Friday closing date is automatically continued by the timely notice. The seller cannot force a Friday closing on unmarketable title. Assuming the contract measures the extension from the original Friday closing date, the extended closing date would be **the following Friday**. If the contract instead counts five business days from the date of notice, the date is earlier. Either way, the seller’s cure deadline is the extended closing date, and North Quay should demand performance as early as possible. North Quay should state in writing: - The Friday closing is withdrawn. - The seller’s “probably under $300,000” estimate is not a cure. - The seller must obtain and deliver the payoff information described below before any closing. --- ## 3. Exact Payoff Information That Must Be Obtained The title company may not estimate the payoff from the original judgment, the docket, or the seller’s statement. The seller/title company must obtain from the judgment creditor or its authorized agent a **current written payoff statement** containing: - The creditor’s name, address, and authorized signer. - The judgment case, court, docket number, and lien recording information. - The remaining principal amount of the judgment. - Accrued simple interest at 8% through a specific payoff date. - The per-diem interest amount after that date. - All credits applied, including the unidentified credits shown on the docket, and how they were applied. - Any collection costs, attorneys’ fees, advances, or other amounts secured by the lien. - The total amount required to obtain a full satisfaction/release of the judgment lien. - The date through which that payoff amount is valid. - The creditor’s release conditions, including how and when a recordable satisfaction will be delivered. - Wire/payment instructions and proof of authority to release the lien. This payoff statement must come from the creditor, not from the seller’s estimate, and must be delivered to and accepted by the title company before any title company will issue an unconditional policy. --- ## 4. Acceptable Cure Methods Under the Dorran rules, the seller may cure through: ### A. Payment and Release - The seller may pay the judgment in full from sale proceeds. - The creditor must issue a recordable satisfaction/release. - The release must be recorded before closing or held by the title company for recording at closing under terms acceptable to the title insurer and lender. - The title insurer must confirm the lien exception is removed. ### B. Binding Release Delivered at Closing - The seller may obtain a binding, recordable release/satisfaction from the creditor and deliver it at closing. - It must be in recordable form and name the correct debtor and property. - It must be delivered to the title company, not merely to the seller’s lawyer. - The title insurer and lender must confirm they will accept that release for funding. ### C. Insurer-Approved Escrow - The seller may establish an escrow with the title insurer or an approved escrow agent. - The escrow must equal **125% of the current written payoff**, not the original judgment and not an estimate. - The escrow instructions must irrevocably direct payment to the judgment creditor and delivery of the release. - The title insurer must confirm it will issue the owner’s and lender’s policies **without exception for the judgment lien**. - The lender must confirm it will fund against that policy. ### D. Purchase-Price Credit - A price credit can be negotiated, but it is not by itself a cure. - It does not remove the lien from the title policy. - It does not satisfy the lender. - A price credit may be acceptable only if it is paired with an actual payoff/release or an insurer-approved escrow. ### E. Indemnity - The seller’s general indemnity is not a cure. - Rule 7 is explicit: a private indemnity does not remove the title defect and does not satisfy the lender. - It may be additional protection after the lien is actually cured, but it cannot replace cure. --- ## 5. Why the Proposed $300,000 Holdback Is Insufficient The seller’s proposal should be rejected. - There is no current written payoff. - The docket credits are unidentified. - The title insurer cannot estimate the payoff. - The creditor has not been contacted. - No creditor has agreed to accept the holdback or release the lien. - No title insurer has approved the arrangement. - No lender will fund with the lien exception. The math also does not work: - The original judgment was $420,000. - At 8% simple interest for four years, before credits and costs, the amount is about **$554,400**. - A $300,000 holdback is less than that pre-credit amount. - Even if the payoff were just under the seller’s estimate of $300,000, a 125% escrow would require about **$375,000**, not $300,000. - If the payoff were $240,000 or less, $300,000 might be mathematically enough for 125%, but only if held by the title insurer/approved escrow and only with creditor consent and a release path. A holdback with the seller’s lawyer is not an insurer-approved escrow. It does not bind the creditor, does not secure payment, does not remove the title exception, and will not satisfy the lender. --- ## 6. Lender and Title Insurer Conditions ### Title Insurer Conditions Before closing, the title insurer must: - Receive the current written payoff from the creditor. - Approve the amount and release terms. - Confirm either: - payment has been made and release/satisfaction has been or will be recorded; or - a 125% payoff escrow has been established with the title insurer or approved escrow agent. - Issue updated title commitments and, at closing, final owner’s and lender’s policies **without the judgment lien exception**. - Conduct a final title search confirming no new liens or judgments. ### Lender Conditions The lender will not fund if either the owner’s policy or lender’s policy excepts the lien. Therefore: - The lender must receive written confirmation from the title insurer that the judgment exception has been removed. - The lender must approve any escrow arrangement before funding. - The lender must confirm that the final loan conditions are otherwise satisfied. - No seller indemnity, holdback, or promise to “true it up later” will be sufficient. --- ## 7. Termination, Waiver, Extension, and Specific Performance ### Termination If the seller fails to cure by the extended date, North Quay may: - Terminate the contract in writing. - Demand return of the $320,000 deposit. - Decline to accept unmarketable title. North Quay is not required to close with the lien in place. ### Waiver North Quay may waive the defect in writing, but that does not solve the lender’s condition. The lender will not fund if the policy excepts the lien. Therefore: - Do not waive the defect unless the title company will remove the exception or North Quay is prepared to close without the lender and accept the risk. - A waiver should be in writing, specific, and only after a deliberate risk assessment. ### Extension North Quay may agree to a further written extension, but should only do so if: - The seller has already obtained a current payoff statement. - The creditor is cooperating. - The title insurer and lender have confirmed the cure can be completed. - The extension is in writing. - It does not unreasonably jeopardize the six-week convention deadline. - The seller pays all additional costs and preserves North Quay’s rights. Do not grant an open-ended extension. Set a new firm closing date. ### Specific Performance If North Quay wants specific performance, it must remain ready, willing, and able to close on the contract terms. That means: - Give timely notice of the title defect. - Honor the cure period. - Do not waive the defect unless intentionally accepting the risk. - Do not terminate if specific performance is still being sought. - Be prepared to close once the seller tenders marketable title. If the seller can pay the lien but refuses to cure, specific performance may be available. If the seller simply cannot cure, North Quay may exercise its termination remedy instead. --- ## 8. Sequence for the Next Seven Business Days Assume no holidays and that the extended closing date is the fifth business day after the original Friday. ### Business Day 1 — Thursday - Confirm the written notice was delivered. - Instruct the title company to request the payoff statement from the creditor immediately. - Direct the seller in writing to contact the creditor today and provide the payoff and release documentation. - Tell the lender the closing has been extended and that the judgment lien must be removed. ### Business Day 2 — Friday (Original Scheduled Closing) - Do not close. - If the seller produces a full payoff, release, and lender/title clearance by Friday, North Quay may agree to close early. Otherwise, do not waive the extension. - Continue pursuing the payoff statement. ### Business Day 3 — Monday - If no payoff statement has been received, escalate directly to the creditor. - When the payoff arrives, review it carefully: - principal, - interest, - credits, - costs, - per diem, - release conditions. - Compare the payoff against the seller’s available $700,000. ### Business Day 4 — Tuesday - If payoff is under $700,000, the seller can likely fund it. - Obtain the creditor’s recordable satisfaction/release. - If payment/release cannot be completed by closing, establish the 125% title-insurer-approved escrow. - Request updated title commitment deleting the judgment exception. - Obtain lender written clearance. ### Business Day 5 — Wednesday - Finalize all cure documents. - Confirm the title insurer will issue owner’s and lender’s policies without exception. - Confirm the lender will fund. - Order final title search/update. ### Business Day 6 — Thursday - Review final title search. - Confirm the payoff or escrow will be funded at closing. - Confirm the release is either recorded or being held for recording by the title company. - Confirm the lender’s final funding conditions are satisfied. ### Business Day 7 — Friday (Extended Closing Date) - Close only if all conditions are satisfied: - current written payoff obtained; - payment made or 125% escrow in place; - release/satisfaction obtained; - title insurer will issue unconditional policies; - lender will fund; - final search clear. --- ## 9. Concrete Decision Rules ### North Quay Should Close Only If - The title company has received a current written payoff from the judgment creditor. - The seller has either: - paid the judgment and obtained a release; or - placed 125% of the verified payoff in an insurer-approved escrow with irrevocable instructions to pay the creditor and obtain release. - The title insurer has committed to issue both owner’s and lender’s policies **without exception** for the judgment lien. - The lender has confirmed it will fund. - The final title search is clear. - Any price credit or indemnity is documented but does not replace the cure. ### North Quay Should Extend Only If - A current payoff has been obtained or is imminent. - The creditor is cooperating. - The title insurer and lender have confirmed the remaining steps can be completed. - The extension is written, time-limited, preserves all rights, and does not destroy the convention timeline. ### North Quay Should Terminate If - The seller has not obtained a current written payoff by the extended date. - The creditor will not provide a payoff or release. - The title insurer will not remove the exception. - The lender will not fund. - The only proposal remains the seller’s indemnity or lawyer-side holdback. - Further delay would jeopardize the convention. --- ## Bottom Line The seller must solve this with the creditor, not with an unverified holdback and a general indemnity. North Quay should give notice today, move the closing into the five-business-day cure period, and require a current written payoff plus either a recorded release or a title-insurer-approved 125% escrow. Close only when the title insurer removes the judgment lien exception and the lender is prepared to fund.