Legal Question in Real Estate Law in Nevada
About 4 years ago, I loaned down-payment money to a relative for the purchase of a four-plex. The agreement was a signed (by both parties) note to repay the principal plus interest in three years, with a 25% ownership transferring to me if the note was not paid on time. Repayment is now a year past-due. I have no interest in owning 25% and the owners are now involved in divorce proceedings. Should I file a lien -- if so, what kind of lien -- in the event there is a forced sale as part of the divorce agreement?
Thank you for your assistance.
1 Answer from Attorneys
I have encountered this dilemma in my practice. Unfortunately, Nevada law may be interpreted to say that you have an "equitable mortgage" on the property, and to get relief after the default, you may be forced to go through a formal, judicial foreclosure proceeding. These are almost never done in Nevada anymore, since our state laws allow "right of sale" foreclosures on deeds of trust that normally do not involve the court. There are some huge risks in a judicial foreclosure, including that the defaulting borrower may have up to a year to redeem the default after you take title (or 25% thereof). You could file a lien if the titled owners are both willing to voluntarily give such a lien. If the house has net equity value, you might convince them to do that and you'll be sure to record it so your debt is not overlooked in a property settlement in their divorce. Otherwise, to enforce your note you will have to treat the debt just like a mortgage.
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