Teaman

Once a declaration of homestead has been recorded by a homeowner, an abstract of judgment recorded by a creditor will not attach as a judgment lien unless there is surplus equity in the home—i.e., a market value that is greater than the total of the homestead exemption and all encumbrances senior to the lien. (Code Civ. Proc., § 704.950, subd. (c).) In this opinion, we address two questions relating to creditors’ rights after a judgment lien has failed to attach upon recordation of the abstract of judgment due to lack of surplus equity: First, may the creditor force the sale of the homestead in satisfaction of the judgment lien if surplus equity accrues at some later time while the debtor owns the property? Second, may such a sale be forced after the debtor has voluntarily sold the property to a third party? We answer the first question in the affirmative and the second in the negative. As a consequence of our answer to the second question, we affirm a judgment granting a petition by third party owners to bar the forced judicial sale of property purchased by the third parties from judgment debtors at a time when the property had no surplus equity.

Background

The…