Component 3: Performance Lien

Now that we’ve seen how the ESA and the Assumptions and Release of Obligations Form work, how do we make sure they’re upheld? What if someone later on in the home decides to just sell it themselves and take any and all equity there is with the home? What if someone just keeps the home, and never pays the other co-owners their fair share? These are violations according to the ESA, but what can we do about it? What we can do about it is exercise our right given in the Performance Lien on the property.

Performance Lien

The Performance Lien is a lien that is filed against the property from the onset of any Tadaima home. What this enables Tadaima to do is to either replace the current co-owner with a new co-owner in the home, or to outright reclaim ownership of the home at the Option Price as mentioned earlier in the ESA. Now this can only ever done in the event that someone neglects their responsibilities in the ESA. Which in short, would be a co-owner that puts the property and it’s value at risk due to negligence, by in part by not performing one or more of the obligations they agreed to in the Buyer Covenants, or neglects to respect the interests in the property held by co-owners prior to that given co-owner. But otherwise, as long as the responsibilities are followed within the ESA Tadaima has no right to dispossess anyone from the home.

How this works, in essence is akin to that of what a bank would do when someone fails to pay their mortgage. Under the mortgage, which is also a lien, the bank can exercise it’s power of sale clause to sell the home against the owners will to get the money back it lent the owner in the first place to buy the home. The Performance Lien functions in a similar way, but with one of the differences being that it is a junior lien in the priority just subordinate to the Mortgage on the property. That way, just like the bank, we too have a power of sale clause to protect our interests which in short is the interest of all the prior co-owners in the home. How these liens work now actually vary state by state. The two acceptable legal processes that can be used secure a lien on a property are either a Deed of Trust or a Mortgage. They both effectively due the same thing, which is requiring the borrower/co-owner to agree to a third party having the right to strip you of your ownership in the home before either getting a loan or becoming a co-owner. They just both go about it in different ways. This is the short and simple though, if you really wanna have a deeper understanding, checkout our Real Estate Concepts section which adds more detail on Mortgages & Liens, Lien Priority, and Deed of Trust vs Mortgages.