If you have ever been involved in a transaction where a real estate investor sought to purchase your property, then you have likely come across a Notice of Interest document in the process of completing that transaction.
A Notice of Interest (NOI) in real estate serves as a declaration of one's legal interest in a particular property following the execution of an enforceable contract. When filed in public records, it primarily serves to put third parties on notice regarding an individual's or entity's interest in a specific piece of real estate. Its legal effects can vary based on the context in which it's used, but generally, it accomplishes the following:
Public Notice: The filing of a Notice of Interest is a way to publicly declare that someone has an interest in a property. This notice is crucial in real estate transactions as it alerts potential buyers, lenders, and others that there is a claim or agreement concerning the property that they should be aware of before proceeding with any transaction.
Priority of Interest: In many cases, the Notice of Interest can help establish the priority of claims against a property. For instance, if there are multiple claims or liens on a property, the order in which they are recorded might determine their priority. This can be especially important in situations involving foreclosure or the sale of the property.
Protection of Interest: By recording a Notice of Interest, an investor or other interested party can protect their interest from being overlooked or bypassed in a sale or transfer of the property. This ensures that their claim or interest must be addressed before the property can be freely sold to a new owner without clouding the title.
Ignoring an NOI can lead to several complications. For instance, an NOI is often treated like a lien against the property. This means it must be resolved or released before the property's title can be cleanly transferred to a new buyer unless some action is taken to extinguish it. If a seller ignores an NOI and proceeds with selling the property to another buyer without addressing this interest, it could result in a "clouded" title due to a breach of contract. A clouded title indicates that there are disputes or unresolved claims against the property, which can prevent or complicate future sales.Â
While a NOI is useful to provide public notice about a contractual relationship, it does have its limitations. It can sometimes cloud title or act as lien in some circumstances, however it is not a lien nor does it typically put binding obligations on third parties, but may be a relevant factor in establishing a tortious interference with a contract claim against a party that causes the seller to breach. It can help prove a breach of contract claim but a NOI is not a contract itself.Â
Whether you anticipate entering into a transaction or are trying to figure out the next steps to deal with a potential breach of an existing contract, an experienced real estate attorney can provide guidance on the best course of action, ensure compliance with state laws, and help navigate any potential disputes that may arise from ignored NOIs or other claims against a property.
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