Efforts to reduce the number of “ghost creditors” that burden the title to real property in Virginia were successful in the General Assembly’s 2021 Special Session I and a new law was passed[1] that, among other things, reduces the time within which a judgment lien can be enforced.  “Ghost creditors” include a creditor that holds a valid judgment lien that has been docketed on the courthouse books for a long period of time, but that creditor has gone out of business or is otherwise unable to be located.  All creditors, however, will be affected by the changes to the enforcement of judgments.

Beginning July 1, 2021, a judgment creditor will have 10 years to enforce its lien from the date of the judgment or domestication of the judgment[2].  This includes judgments in favor of the Commonwealth and those rendered in another state or country, but excludes judgments created by the nonpayment of child support which can be enforced for 20 years.  The law is prospective only, thus, judgments dated prior to July 1, 2021 can be enforced for 20 years from the date of the judgment or domestication of the same.

Judgment liens may be extended beyond the initial 10-year enforcement period, but the procedure for extending a judgment has also changed.  The new process is easier and more efficient than the prior method for extension, which required the judgment creditor to file a motion with the circuit court of the jurisdiction in which the judgment was entered to show cause for why the period for issuance of execution or bringing of an action should not be extended.  After a hearing on the motion, and if the court was satisfied that there was no good cause shown for failing to extend the period of limitation, the court would enter an order extending the enforcement period for an additional 20 years. 

Commencing July 1^st, the time period for action on a judgment lien can be extended by the simple filing of a certificate of extension, the form of which is included in the new law.[3] The certificate must be filed prior to the expiration of the prior enforcement period in the clerk’s office in which the judgment lien is recorded.  It requires the signature and certification of the judgment lien creditor or their duly authorized attorney-in-fact or agent and must be sworn to and acknowledged before a Notary Public.  Recordation of the certificate extends the right to enforce the judgment lien for an additional 10 years from the date of the certificate’s recordation. A judgment creditor is permitted to record one additional extension prior to the expiration of the original 10-year extension, which will extend the limitation period of the right to enforce the judgment lien for 10 years from the date of recordation of the second certificate (for a total of 30 years of enforcement time).  An exception to the extension procedure exists if the action is against a personal representative of a decedent.  Such an extension may be for only two years from the time of recordation of the certificate and there may be only one extension. 

In addition to amending the time and procedure for the enforcement of a judgment, the General Assembly changed Virginia law effective July 1st to permit a settlement agent or title insurance company to release a judgment lien, similar to release of a deed of trust as provided under current law, as long as the obligation secured by such judgment lien has been satisfied by

payment made by the settlement agent.[4]  “Judgment lien” includes a judgment for money rendered in Virginia by any state or federal court or by confession of judgment from the time such judgment is recorded on the judgment lien docket of the clerk’s office of the county or city where the land is situated, but does not include any lien in favor of the federal, state, or local government, or any political subdivision thereof.  A settlement agent or title insurance company intending to release a judgment lien must deliver to the lien creditor by certified mail or commercial overnight delivery service or the United States Postal Service, receipt obtained, a notice of intent to release the judgment lien with a copy of the payoff letter and a copy of the release to be recorded.  The law also prescribes affidavit and certificate of satisfaction requirements.  Note that there is no requirement that the settlement agent or title insurance company obtain authority from the creditor prior to releasing a judgment lien.

Be sure to update your bank’s operations to incorporate these legal changes to the enforcement and satisfaction of judgment liens.

For more information about this article or other legal banking issues, contact DeMarion Johnston, VBA General Counsel, at djohnston@vabankers.org. This article has been prepared for informational purposes only and is not legal advice.