Whether caused by the failure to follow precise escrow instructions or inattention to detail by one or more of the parties to a closing or payoff, the indebtedness secured by a lien on real property is often satisfied, but such lien is not released of record. Title companies conducting closings often close on a payoff letter from the holder of the debt, without having obtained a lien release on the date of closing. Many times, such lien release is not subsequently obtained and recorded, leaving the property owner with a cloud on its title. Fortunately, Colorado law offers some guidance and leverage for those who find themselves in that situation.
C.R.S. 38-35-124 requires that the creditor or holder of an indebtedness secured by a lien on real property release that lien of record with ninety days following the satisfaction of such indebtedness and receipt of reasonable costs to release the lien unless: (i) the debtor requests that the lien not be released, or (ii) the person satisfying the indebtedness requests in writing that the holder of the debt deliver to him or her the cancelled instrument of indebtedness (e.g. the promissory note) at the time of satisfaction, in which case the creditor is relieved of any further obligation or liability under C.R.S. 38-35-124 after such delivery has been completed. Any creditor or holder of the indebtedness who fails to comply with Section 38-35-124 is liable to the owner of the real property encumbered by such indebtedness and to any other person liable on such indebtedness for all actual economic loss incurred enforcing the rights provided under Section 38-35-124, including reasonable attorney fees and costs.
If nothing else, “reminding” a creditor that fails to release its lien of the foregoing statutory requirements will likely persuade an otherwise unmotivated (former) creditor to aid in clearing title to your property.