Can a lender force property into foreclosure and take title with existing medical liens against the property?

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Can a lender force property into foreclosure and take title with existing medical liens against the property?

Short sale. Title has medical liens of $17000 to hospital paid through Medicare. The remaining title holder had no knowledge they were filed. What happens now?

Asked on July 23, 2010 under Real Estate Law, Illinois

Answers:

MD, Member, California Bar / FreeAdvice Contributing Attorney

Answered 11 years ago | Contributor

If a bona fide purchaser took title in good faith with no knowledge in any way shape or form, theoretically the person could take title free of the liens. However, in most land and home sales, the liens have been recorded, and if recorded properly (either through the grantee or grantor index), then the person who is purchasing should have constructive if not actual knowledge of the liens.  The title insurance/title search process is for this very purpose.  If the seller did not inform the buyer, and the lender did not inform the buyer in any disclosures, then theoretically there was a cloud on title and the buyers did not purchase free and clear title.  A number of events could occur from here: either the lien holder (medical) is out of luck, the sale must be rescinded or the lien must be taken care of by the seller outside of this home sale. 


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