A lien is an encumbrance or claim filed against another person’s property, which can include both real estate and personal property, in order to secure a debt owed by that person. A lien will remain on the property owned by the person owing the debt, until the matter is resolved, either by paying the debt in full, by reaching some sort of compromise with the creditor, or by the debt expiring due to the passage of time. While the lien remains on the property, the owner typically cannot refinance the property unless the lien is satisfied. Moreover, while the lien need not be paid in order for the property to be sold or otherwise transferred, the new owner of the property will become responsible for the lien so long as it remains on the property, as well.
Liens should be filed against a person’s real estate when that person owes a judgment or debt that has gone unpaid. While liens do not often provide an immediate source of payment toward unsatisfied debts, they can provide for the eventual payment of debts in the absence of other, easier means of securing payment. There are a variety of scenarios that might lead to the placement of a lien causing payment of the debt, such as foreclosure of the real estate, the debtor’s need to refinance the real estate, and/or the debtor’s need to sell the real estate free of liens. For example, if the real estate becomes subject to a foreclosure action, having a lien on the real estate may result in payment of the underlying debt in order for the foreclosure action to be resolved. Likewise, if a debtor wants to sell the real estate, a new buyer is likely to require that the real estate be free of liens and encumbrances, so that he or she may take clear title to the real estate. In this situation, too, the debt that resulted in the lien being placed on the real estate will have to be paid in order for the sale to occur. Therefore, placing a lien on a debtor’s real estate may be instrumental in securing payment of a debt owed to you.
Each state has its own procedures and laws for filing a lien against a piece of property or real estate. In most jurisdictions, the creditor, or the person or entity to whom the debt is owed, must give notice to the debtor in some manner prescribed by law, and may have to give the debtor a certain period of time in which to respond. Once any notice requirements are satisfied, the creditor then must file and/or record certain legal documents with the appropriate government office, which may be a court, recorder’s office, and/or clerk’s office, depending on the jurisdiction.
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For legal assistance with filing a lien, you are well-advised to contact an attorney who practices in the areas of real estate law, or creditors’ rights law. An attorney can advise you of the proper procedures for filing a valid lien, as well as any advantages and/or disadvantages of doing so based on your situation.