# Question 48: The Lien Two Days Before Closing

## Your role

You represent North Quay Hospitality, the buyer of a hotel property in the fictional State of Dorran. Closing is scheduled in two days. A title search has disclosed a judgment lien against the seller, but the current payoff amount is not in the file.

## Governing law

Assume the following Dorran rules and contract terms apply:

1. The seller must convey marketable title free of monetary liens other than those the buyer expressly accepts.

2. The buyer must give written notice of a title defect no later than one business day before closing. Timely notice extends closing for five business days to permit cure.

3. During the cure period, the seller may satisfy and release the lien, obtain a binding release for delivery at closing, or arrange an insurer-approved escrow that permits an unconditional policy without exception for the lien.

4. The title insurer may insure over a judgment lien only after receiving a current written payoff and either confirmed payment or an escrow equal to 125 percent of the payoff. The insurer may not estimate the payoff from the original judgment alone.

5. The buyer's lender will not fund if the owner's or lender's policy excepts the lien. A promise by the seller to handle the lien after closing is insufficient.

6. If the seller fails to cure by the extended date, the buyer may terminate and recover the deposit, waive the defect, or agree to a further written extension. The buyer is not required to accept unmarketable title.

7. The buyer may negotiate a purchase-price credit or escrow, but a private indemnity does not itself remove the title defect or satisfy the lender.

8. A party seeking specific performance must remain ready, willing, and able to close on the contract terms, including giving timely defect notice and honoring a valid cure period.

## Facts

North Quay agreed to buy the Halberd Hotel for $6.4 million and deposited $320,000. Closing is Friday. Today is Wednesday.

The title commitment issued this morning lists a judgment lien entered four years ago against the seller. The original judgment was $420,000 and accrues simple interest at 8 percent, but the docket shows several unidentified credits. The title company has no current payoff statement and will not calculate one from the docket. The supplied record does not state the remaining principal, accrued interest after credits, collection costs, or the judgment creditor's release conditions.

The seller says the lien is "probably under $300,000" and offers a general indemnity. It has not contacted the creditor. The title insurer will insure over only under rule 4. North Quay's lender confirms that it will not fund with the lien exception.

The purchase agreement permits the five-business-day cure extension. The seller has enough sale proceeds to pay a lien up to $700,000. North Quay still wants the property but must open for a convention in six weeks. A delay beyond the five-day cure period could affect renovation scheduling.

The seller asks North Quay to close Friday, leave $300,000 with the seller's lawyer, and "true it up later." No creditor consent or insurer approval supports that figure.

## Assignment

Provide an ordered closing plan addressing:

* The written defect notice and its deadline.
* The five-business-day cure extension.
* The exact payoff information that must be obtained.
* Cure by payment, release, insurer-approved escrow, price credit, or indemnity.
* Why the proposed $300,000 holdback is or is not sufficient on the present record.
* Lender and title-insurer conditions.
* North Quay's termination, waiver, extension, and specific-performance positions.
* The sequence for the next seven business days.
* The concrete conditions under which North Quay should close, extend, or terminate.

---

---