The letters NOI stand for Notice of Interest or are sometimes incorrectly referred to as a Memorandum of Agreement or MOC. It is usually a one-page document that states that the person presenting the document for registration with the County Clerk’s Office has an equitable interest in a property because of a signed contract of sale.
The NOI is most commonly used when an investor signs a sales contract with an owner / seller and wants to show anyone trying to make another offer on the property that they have a legal interest in the property. This is the case when someone else, usually another investor, shows up and offers the owner a higher price.
Investors’ practice of auctioning properties after they are under contract is becoming more common in distressed markets, but it even occurs in normal markets. Investors who regularly make statements to owners like, “Get your highest bid of those other guys and give me a call, I’ll give you more money than any of them, I just need to see it in writing.” The unpleasant part of that statement is the term “in writing” because that generally means that the landlord must sign a contract.
While I can’t blame the owner for wanting more money, what I’ve seen happen most often is a black hat investor trying to steal the deal, actually coming to the closing table and renegotiating the price below what that he expected. had originally offered to the trusted seller. How can I know? I’ve been on the other side of their offerings and had to fight to keep my salespeople.
So every now and then we have to fight for our closures and I’ve covered this in other articles on how to do this. The ironic part is that it is a crime to “induce” someone to sign a contract when another contract is in effect. The Attorney General’s Office will take these cases if you show evidence and the seller cooperates, which is often the case when the homeowner is threatened with a lawsuit or foreclosure.
So when we sign a contract with a seller, we almost always register a NOI in the public registry which is effectively a bond against the property. I want to repeat this because the subtleties of this “link” are far reaching. This NOI must now be posted as a bond on the property before title can be transferred, unless there is a foreclosure action to extinguish it, or the bondholder (the original investor / buyer) initiates a foreclosure action to take ownership. If this sounds harsh, it is just a solution to a problem in which one of the parties to a contract does not retain their part of the contract terms, just as a lender does with a homeowner.
The owner / seller does not need to sign the NOI for anyone to put a NOI on anyone’s property. Just remember, there is usually a sign in the clerk’s office that says something to the effect that “if you enter a lien that is not valid, it is a felony,” so think twice before you do it – don’t do it with anger or it could cost you a lot in attorney’s fees.
That said, the courts and sometimes the recording clerk treat NOIs like unruly in-laws. They probably tolerate them for the fees, but they don’t like them very much due to historical issues with the seller not knowing these links have been featured. Many standard real estate contracts specifically prohibit filing a notice of interest for it to be recorded in the public registry. This prohibition can be overcome by removing this applicable clause and initialing both the seller and the buyer, or by adding a primary clause or addendum to your contract.
Once a NOI is filed in the public record, the next time title to the property is transferred, the title agent will need to have a Release of Lien for the NOI to sign to write or write down a title policy on the property. as an “exception” in politics. If the NOI is not extinguished by a lien release, the title has become “clouded” and needs to be expunged and a transfer to a new buyer may not go through properly.
This is where you come in to release the link and it usually happens when you least expect it, right before you planned to close it! Sometimes the landlord calls when he receives a copy of the registered NOI from the clerk’s office and was not expecting it; Either way, the seller is trying to default on the transaction. Sometimes the seller changes his mind for a valid reason, most of the time he doesn’t.
You have a couple of options when the NOI “hits the fan”, so to speak:
1.) Release the NOI using a lien release document and receive a payment to release the lien
2.) Honk the horn and fight the seller to get them to close or get paid to release the link.
In short, your choice is personal and determined by the potential loss of profit on the deal, the owner / seller’s actual reason for not wanting to sell, how much you can be paid for the release of the link, and its disposition that day. In the final analysis, the choice is yours to force the seller to close or release the link.