Real estate can be a complicated affair. Between property liens, title insurance and the process of finding the right buyer at the right time, there’s a whole host of documents and notices that many homeowners are entirely unfamiliar with—and can seem both confusing and intimidating including a notice of interest.
Property Interest Notice
Perhaps you’ve received a notice of interest or maybe you’ve heard of it and simply haven’t the foggiest notion of what it is. Perhaps it’s the first time you’ve heard the phrase “notice of interest” and are frightened of receiving one. What is it? How does it affect you? What does it mean? And what steps can you take to avoid receiving one?
If you received a property interest notice and simply felt it was too insignificant or obscure to respond to… think again. A notice of interest can mean serious business for you. It can play a decisive role in whether or not you keep your property. And it’s something that should be an unquestionable cause of concern for you. But there are ways to fight it. But first? Let’s take a look at what a notice of interest actually is.
What Is A Notice Of Interest?
A notice of interest (or memorandum of contract) is sent out when a potential buyer or investor has a shared and equitable interest in a property as a result of a signed purchase and sale contract. Equitable interest can be a bit tricky to explain, since it’s a broad term that doesn’t solely apply to legal ownership. Instead, it’s assigned to public interest in a property which could potentially be allocated to a prospective buyer. It doesn’t indicate the prospective buyer is the legal owner; but it does indicate that a lien either has been or could potentially be placed on your property which would allow them ownership.
In Utah, a notice of interest is actually a fairly common procedure, and sometimes for beneficial reasons. Tenants in a rent-to-own contract may sometimes file a notice of interest along with property owners to ensure title searches reveal shared interest in a home. In cases of foreclosure resulting from a homeowner’s default on a loan, this can actually provide insurance for a tenant against legal liabilities.
But a notice of interest more often than not presents an obstacle for homeowners. Most frequently, it’s received as notification of a property encumbrance indicating a claim against a property; and that claim isn’t always necessarily a monetary claim. An encumbrance can also include property use restrictions and easements. Public utility providers, for example, can place an easement against your home for necessary repair and construction work which can impact its value, even if you’re the legal owner.
Example Scenario in Utah
Imagine a homeowner in Ogden signs a rent-to-own agreement with a tenant who plans to buy the home in two years. The tenant records a notice of interest. Six months later, the homeowner gets a better offer and wants to sell immediately. When the title company runs the report, the tenant’s notice shows up. Even though the tenant has not purchased the house yet, their recorded interest stops the sale until the matter is resolved. This is exactly how a notice of interest impacts real-world transactions and why Utah sellers must take them seriously.
Notice of Interest Versus a Lien
A common misunderstanding is that a notice of interest is the same thing as a lien. In Utah, a lien secures repayment of a debt, while a notice of interest simply asserts that someone claims rights to buy or use the property under an agreement. The notice itself does not create a financial obligation like a lien does, but it can have the same practical effect of blocking a sale. Homeowners should recognize this distinction because the remedies for removing a wrongful lien and a wrongful notice of interest are not always the same.
How Does A Notice Of Interest Affect My Property?
Filing a fraudulent notice of interest is considered both a state and federal felony. They’re typically filed in conjunction with a lien to establish ownership or potential ownership. And just like liens, a notice of interest is a matter of public record, both in Utah and the rest of the U.S.
But is a notice of interest the same as a property lien? Not necessarily. While a notice of interest is the first step towards filing a property lien, it does not indicate a lien has necessarily been filed. But it can mean an interested party can move forward with both a lien and potential foreclosure if you have not discharged the lien with a warranty deed. In Utah, a person is liable for $10,000 or three times the actual damages if they record a wrongful lien in the office of the county recorder against your property.
Stopping a property lien in Utah requires filing a written petition in court detailing the allegations and why you suspect the lien was wrongfully filed. If deemed valid by the court after hearing both parties’ arguments, the court will then issue a temporary ex parte order nullifying the lien. If the party who filed the lien does not file a request for hearing within 10 days, the ex parte civil wrongful lien injunction automatically becomes a civil wrongful lien Injunction which doesn’t expire for 3 years after it’s served.
While the fees for filing petition against a wrongful lien are relatively moderate in Utah (and can be anywhere from $155 upwards), it’s also a time consuming process; and one in which the outcome is never guaranteed.
Clouded Title Explained
Homeowners in Utah often hear the term clouded title without fully understanding it. A cloud on title simply means there is something recorded at the county recorder’s office that creates uncertainty about who has the right to sell or transfer ownership of the property. A notice of interest can create exactly this problem. Until that notice is cleared, title companies may refuse to insure the transaction. Without clear title insurance, most buyers and lenders will walk away, leaving the seller with a property that technically cannot be sold on the open market.
How Can I Remove A Notice Of Interest?
If a notice of interest is filed in conjunction with a property lien which hasn’t been wrongfully filed, you’re not left with much recourse. You can either pay off the lien in full(which can sometimes involve accruing additional penalties and interest fees) or face potential foreclosure. Which is never a pleasant financial reality for many homeowners. But it is a reality. And even relying on a costly attorney during a wrongful lien injunction won’t always ensure a ruling in your favor; and in many cases, can prove far more expensive than it might actually be worth.
But at Gary Buys Houses, we provide a unique solution. Our Sell Now, Move Later program is designed to help homeowners like you use the proceeds from the sale of your property to pay off your lien in full while still living in your residence—sometimes rent free in certain short term cases.
We know just how frustrating it can be to face a notice of interest. And we know how frustrating it is to deal with a property encumbrance like a lien, especially if you’re looking to purchase an additional property or simply find you need to access your home equity. That’s why we’ll work with you each step of the way to ensure the purchase process is a seamless one, with all the professionalism and courtesy hundreds of Utah homeowners have come to expect from us.
Priority of Claims and Third-Party Impact
When a notice of interest is recorded in Utah, it is essentially giving the world public notice that someone else has an existing interest in the property. This creates a priority issue because any future buyer or lender who checks the title report will see that notice before moving forward. In practical terms, this can stop a new buyer’s financing dead in its tracks or prevent a refinance from closing until the issue is resolved. That is why even if the notice of interest does not guarantee ownership, it still carries serious weight in how others view the property.
Legal Remedies and Removal Options
If you believe a notice of interest has been recorded against your property without justification, Utah law allows you to petition the court for relief. This can include filing a wrongful lien action, requesting that the notice be removed, and in some cases seeking damages if the filing was malicious or without basis. Some homeowners also resolve notices of interest through direct negotiation with the party who recorded it, often exchanging a release for a settlement or clarification of contract terms. The right approach depends on the circumstances, but ignoring the notice usually makes things worse.
Jurisdictional Differences and Legal Advice
While this article is focused on Utah law, it is important to remember that notices of interest are treated differently across states. Some states may not even allow them in the same way Utah does. That is why homeowners should always confirm their options with a Utah real estate attorney if they are directly affected. Getting clear legal advice early can save months of frustration and help protect your property rights.
Don’t let a notice of interest stand between you and your home. Call us today at (801) 382-9199.