Are Liens or Other Recorded Documents Holding up Your Transaction?

There are a variety of liens and recorded documents that can hold up a transaction, including mechanic's liens, HOA liens, unauthorized deeds, deeds of trust or mortgages, and many others. If someone has recorded such a document against a property and you believe the document should never have been recorded or is wrongful in some way, you should consult a licensed attorney.

A.R.S. § 33-420 provides a special cause of action for an owner (or beneficial title holder) of real property in the event that another person records a false or groundless claim against that property. Pursuant to A.R.S. § 33-420(A), "[a] person purporting to claim an interest in, or a lien or encumbrance against, real property, who causes a document asserting such claim to be recorded in the office of county recorder, knowing or having reason to know that the document is forged, groundless, contains a material misstatement or false claim or is otherwise invalid is liable to the owner or beneficial title holder of the real property for the sum of not less than five thousand dollars, or for treble the actual damages caused by the recording, whichever is greater, and reasonable attorney fees and costs of the action." The owner (or beneficial title holder) can subsequently bring a special action to clear title to the property.

Additionally, the owner (or beneficial title holder) can have a cause of action against anyone named in a document claiming a false or groundless claim against the property if that person knows of the invalidity and willfully refuses to release the claim within 20 days from the date of a written request to do so. The named person can be responsible for statutory damages in the amount of $1,000.00 or treble actual damages, whichever is greater, and reasonable attorneys' fees and costs.

These issues often come up in the context of a mechanic's lien or HOA lien and can sometimes arise when parties have created their own documents for a transaction in the past and made a mistake in recording them. As discussed above, Arizona law provides stiff penalties for anyone who knowingly and wrongfully records a document claiming an interest in property, or refuses to release such document when the defect is brought to their attention. Oftentimes, these matters can be cleared up by a letter from an attorney. If not, the matter may be litigated and the prevailing party is typically entitled to their reasonable attorneys' fees. Notably, the damages can be quite high if the transaction is prevented from going through because of a wrongfully recorded document. As discussed above, the statute provides for the victim to be awarded triple their actual damages.

In our practice, we have come across a significant number of mechanic's liens, HOA liens and even deeds that are defective and invalid for a variety of reasons. Before you let a wrongfully recorded document hold up your transaction, you should consult a licensed attorney to determine your legal options.

Mark J. Bainbridge is the founder of The Bainbridge Law Firm, L.L.C., a real estate and business litigation firm in Phoenix. Ph: 602-274-6369.