How a notice of interest can save your real estate investment deals

The letters NOI stand for Notice of Interest or are sometimes incorrectly referred to as a Memorandum of Contract or MOC. It is usually a one-page document that stipulates that the person submitting the document for filing with the County Clerk’s Office has a equitable interest in a property due to a signed purchase and sale contract.

The NOI is most commonly used when an investor signs a purchase and sale agreement with an owner/seller and wants to show anyone who tries to make another offer on the property that they have a legal interest in the property. This is the case where someone else, usually another investor, shows up and offers the owner a higher price.

The practice of investors auctioning properties after they are under contract is becoming more common in distressed markets, but it happens even in normal markets. Investors who regularly make statements to homeowners like, “Get your highest offer out 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 ugly part of that statement is the term “in writing” because it usually means 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 gets to the closing table and renegotiates the price below what that he had originally offered the unsuspecting seller. How can I know? I was on the other side of his offer and had to fight to keep my vendors.

From time to time we have to fight for our closures and I have covered this in other articles on how to do it. The ironic part is that it is a criminal offense to “induce” someone to sign a contract when another contract exists. The Attorney General’s Office will take these cases if you present evidence and the seller is cooperative, which is often the case when the owner is threatened with a lawsuit or foreclosure.

So when we sign a contract with a seller, we almost always file an NOI with the public registry which is effectively a lien against the property. I want to repeat this because the subtleties of this “link” are far-reaching. This NOI must now be released as a lien on the property before title can be transferred, unless there is a foreclosure action to extinguish it, or the lien holder (the original investor/buyer) files a foreclosure action to take the property. If this sounds harsh, it’s just a solution to a problem where one party to a contract will not honor their part of the contract terms, just like a lender does with a homeowner.

The NOI does not need to be signed by the owner/seller, so anyone can put a NOI on anyone’s property. Just remember, there’s usually a sign in the Clerk’s Office that says something like “If you enter a link that’s not valid, it’s a felony,” so think twice about what you’re doing before you do it – don’t do it. in anger or it could cost you a lot in attorney fees.

That said, the courts and sometimes the recording clerk treat NOIs like wayward in-laws. They probably tolerate them because of the fees, but don’t like them very much due to historical issues with the seller not knowing these links have been archived. Many standard real estate contracts specifically prohibit the submission of a notice of interest for registration in the public record. This prohibition can be overcome by removing this relevant clause and having both seller and buyer initial, or by adding a waiver clause or addendum to your contract.

Once a NOI is filed with the public record, the next time title to the property is transferred, the title agent will need to have a signed Release of Liaison for the NOI to write a title policy on the property or notate it as “exception” in the policy. If the NOI is not extinguished by a Bond Release, the title has become “clouded” and must be cleared and a transfer to a new buyer may not be successful.

This is where you go in to release the link and it usually happens when you least expect it, right before you planned to close yourself! Sometimes the owner will call when they get a copy of the NOI on file from the clerk’s office and you didn’t expect 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 isn’t.

You have a couple of options when the NOI “hits the fan” so to speak:

1.) Release the NOI using a Link Release document and get paid to release the link

2.) Honk and fight the seller to get them to close or get paid to release the link.

In short, your choice is personal and is determined by the potential loss of profit on the deal, the owner/seller’s real reason for not wanting to sell, how much you can be paid for the release of the bond, and your disposition that day. In the final analysis, the choice is yours to force the seller to close or release the link.