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Liens on real estate are claims against property that are made in order to secure payment of a debt. If a person who owes a debt, often called a debtor, owes money to another person or entity, commonly called a creditor, then the creditor may place a lien on the debtor’s property for the value of the debt owed. As a result of the lien, the real estate is used as collateral against the debt. As collateral, the real estate becomes an asset that is a potential source of payment of the debt, if the debtor otherwise fails to satisfy the debt by paying it in full.
Types of Liens
There are many different types of situations that can result in the placement of a lien on real estate. In some cases, property owners place voluntary liens on their property, such as mortgage liens. By pledging their real estate as collateral for the mortgage loan, homeowners are able to secure the funds that they need for home improvement, debt consolidation, or other purposes.
On the other hand, many liens are involuntary in nature. For instance, if property taxes are not paid by a homeowner, the government unit that assesses property taxes may place a lien on the property for the amount of the unpaid taxes. A homeowner also may have an involuntary lien placed on his or her property for work that was done on the property, which is usually referred to as a construction or mechanic’s lien. Any judgments for unpaid debts awarded by a court can attach as liens to a debtor’s property, as can unpaid sums of child support.
Filing a Property Lien
The process that creditors must follow in order to place liens on property differs according to state law. In most jurisdictions, there are specific notice requirements that a creditor must follow in order to notify the debtor that the lien may be placed on his or her real estate. Thereafter, creditors must take all other necessary steps under that state’s law in order to place a valid, legally binding lien on the debtor’s real estate, which may include filing certain legal documents with a court, recorder’s office, or county clerk’s office, depending on the jurisdiction, and/or preparing paperwork to be placed on file in the jurisdiction’s land records.
Releasing a Property Lien
The most obvious way to release a lien is for the debtor to pay the debt in full. Once the judgment, debt, or other financial obligation is paid by the debtor, the creditor must release the lien on the debtor’s real estate. Furthermore, the mere passage of time will release a lien in most jurisdictions; for instance, in some states, a judgment may become void after twenty-five (25) years, which results in release of the judgment lien by operation of law. While exact procedures vary from state to state, the creditor usually must execute a document that releases the lien, which is then placed on file with the appropriate governmental entity. A lien release gives notice to everyone that the creditor no longer has any valid legal claim as to the debtor’s property.
Read more about Releasing a Property Lien and getting help.
A mechanic lien is a claim against property for the value of services provided to a property owner with respect to that property. The most common instances that give rise to mechanic liens tend to involve home improvement services provided by a contractor or subcontractor. If the property owner contracts for certain services with a contractor, the work is then performed by the contractor, and the property owner refuses or otherwise fails to pay for those services as agreed, the contractor may file a lien against the property, which may be referred to as a mechanic lien, a construction lien, or a contractor’s lien. By placing a lien against the property, the contractor is attempting to secure payment of the unpaid services by using the property itself.
Read more about Filing a Mechanics Lien
Legal Help with Property Liens
For assistance with filing and releasing liens, it is always best to contact an attorney who is experienced in real estate law and/or creditor-debtor laws. By consulting an attorney, you can ensure that you follow all necessary procedures under your state’s laws in order to place a legally binding lien on a debtor’s property, or to have a lien released from your property if you are eligible to do so. If you fail to comply with your state’s laws in this regard, you may lose valuable rights to collect a debt.