What is a Lien?

What is a Lien?

If you have ever attempted to sell a or purchase home, you might be informed with property liens—which are linked to its mortgage. However, liens can additionally be put on other kinds of property, including vehicles or possibly work done on your home.

What is a lien? And how do you get one taken off? Here’s a breakdown of the way liens work.

Key Take Aways

  • A lien is a legal claim towards personal property by a lender to fulfill a debt.
  • Liens can be voluntary or involuntary.
  • Liens can make it more difficult to borrow money.

What is a Lien?

A lien is a legal claim against any kind of property that can be used as collateral to guarantee the paying back of a debt. Liens give the lender the right to sell the borrower’s property should they fail to repay the dues they owe.

A lot of liens are voluntary liens meaning both the borrower and the lender enter into the contract voluntarily. However, there are also involuntary ones, which happen without the borrower’s permission. These are usually the result of a legal dispute. For instance, if you owe taxes, the IRS might file a federal tax lien toward your property.

Types of Liens

There are many kinds of liens. Here are four general kinds:

  • Property liens
  • Judgment liens
  • Tax liens
  • Mechanic’s liens

How do Liens Work?

Below is how liens work, using a mortgage lien as an example.

When getting a mortgage to buy a home, the lender could put a mortgage lien on the home. This lien is voluntary and provides the lender with the right to take back the home should you fail to make your payments.

If you fail to make your mortgage payment, the mortgage lender might foreclose on your home and collect the unpaid debt by means of the sale of the property.

In relation to a mortgage lien, the sale of the property might not be sufficient to cover the unpaid debt linked to the lien. In this scenario, the lender might be able to assign the lien to another asset or property that the borrower owns.

How do You Get a Lien Removed?

Usually, the only way to get a lien removed is to pay the off the debt that’s linked to it. In the instance given above, that could either be by paying off the mortgage completely or permitting the home to be sold through foreclosure.

In situations in which the lien is placed against the law or the lender and borrower take issue on whether the repayment has been finished, a lien might be removed in court.

However, it’s important to not forget that removing a lien does not necessarily mean the debt is removed too. Whereas liens don’t show up on credit reports, not paying debt can adversely impact your credit scores. And that could make it difficult to be eligible for loans and credit at some point in the future.

Liens in a Nutshell

Liens are a legal device that lenders use to protect their investment. Whereas it’s normal to have a lien as part of a mortgage or vehicle loan, declining to pay the debt linked to the lien can have repercussions on your personal finances. It might also make it harder for you to sell your property or take out other loans down the road.

Dar Liens Offers Lien Processing and Filing in Arizona

Dar Liens Offers Processing and Filing of the following types of Liens: Pre-Liens, Notices to Owner Medical Liens, Construction Liens, Mechanics Liens, HOA Liens, 20 Day Preliminary Lien Notices, and more.

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Mechanic’s Lien

Mechanic’s Lien

A mechanic’s lien is an ensuring of payment to builders, contractors, and construction companies that repair or build structures. This type of lien also extends to material suppliers and subcontractors and additionally cover building repairs. The lien guarantees that the workmen get paid prior to anyone else in case of a liquidation.

Understanding a Mechanic’s Lien

Mechanic’s liens are usually required to secure construction assistance on a project. The lien stays in effect until the project gets finished and all construction workers have been paid.

From an investing perspective, it is essential to remember that mechanic’s liens commonly have a higher priority than other types of debt. This priority establishes the order of claims in the event of repossession or foreclosure.

The conceptual source of a mechanic’s lien dates back to the US’s early days. The lien was initially developed by Thomas Jefferson to create an estate owner in the new nation. The US had extensive areas of fertile land and a mechanic’s lien assisted people to monetize the land and construct farms. It is referred to as a mechanics lien since construction workers were called mechanics (or individuals that work with their hands) back then.

Mechanic’s Lien Enforcement

A mechanic’s lien can be utilized to handle both unpaid labor and material expenses associated to a construction project.

Each state has their own laws overseeing the specific kinds of expenses that might be included when filing a mechanic’s liens. Additionally, it’s worth considering that there might be time constraints and statutes of limitations when filing a mechanic’s lien based on when the work was carried out or when construction was finished.

This type of lien is also referred to as a materialmen’s lien or an artisan’s lien.

A property owner might feel inclined to resolve a mechanic’s lien sooner than later since a property usually can’t be sold while a lien is active. Any possible purchaser of the property would notice there is an active lien when they carry out a title search. Any recent owner would be held liable for handling liens connected to the property.

Mechanic’s liens are required be separate from machinery or possessory liens. The aforementioned gives the owner the right for filing a claim towards a property or share of real estate. The owner is required to follow due court process and is unable to expel property holders from their property. Machinery liens provide the owner with the right to retain a piece of machinery, like a vehicle, for delinquent dues.

Dar Liens Offers Lien Processing and Filing in Arizona

Dar Liens Offers Processing and Filing of the following types of Liens: Pre-Liens, Notices to Owner, Medical Liens, Construction Liens, Mechanics Liens, HOA Liens, 20 Day Preliminary Lien Notices, and more.

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Who Can Put a Lien on a House?

Who Can Put a Lien on a House?

We like to think our home is where the heart is. However, that is not necessarily so, particularly when a lien has been placed on it, and you are the last to find out about it. In all fairness, a lien is placed to collect an overdue debt, but that doesn’t mean your own home needs be used as collateral. To bypass this situation, this post is going to review the various types of liens that can be placed on your property, and what you can do about them.

What Is a Lien?

A lien is a legal assertation, attached to your property, in which puts others on notice that you owe a creditor overdue debt. Prior to you being able to sell your property and give a clear title to your buyer, you need to pay off that lien.

What are the various types of liens on a house?

Voluntary Liens

Mortgages are prime examples of a voluntary lien. Here, the property owner—or debtor—voluntarily provides a financial institution—or creditor—a legal assertation to the property pending that mortgage has been repaid.

Involuntary Liens

Many creditors, on the other hand, can file liens toward your property without your approval. Known as an involuntary lien, and in a lot of cases existing due to an already existing law presents a creditor a lien on your property when you defaulted on a debt.

Judgment Liens

A creditor can also take you to court, win a judgment toward you and file the judgment through the county records department. Filing that judgment results in a lien on your home.

General Entities That Might Place a Lien On Your Home:

  • Attorney fees
  • Creditors
  • Contractors
  • The IRS
  • Child support/alimony
  • Real estate taxes

How Do Liens Impact Homeowners?

An outstanding lien can impact a homeowner in many ways, and none of them are favorable. You might lose your property should a sale be forced because of an outstanding lien. Additionally, your credit rating can take a significant hit because a mechanic’s liens and judgment liens are reportable to credit agencies, and factor into your repayment record.

How Do Liens Impact Sellers?

A lien placed towards your property could prevent you from selling the house. A buyer needs to be wary of a home that has an ‘obscure’ title, and no financial institution is going to present a mortgage to a property with lien put towards it.

How To Have a Lien Removed

One way to get a lien removed is to just pay off the debt. However, you can mediate with the lien holder for a decreased settlement and pay less than was initially owed. Nonetheless, make sure the creditor officially releases the lien from your property, and make sure to obtain a copy of the ‘release of lien’ for record keeping. There are several other ways to have a lien removed—eliminate the lien by filing for bankruptcy, hold off so the statute of limitations concludes, and, in specific cases, obtain a court order to have it removed.

Dar Liens Offers Lien Processing and Filing in Arizona

Dar Liens Offers Processing and Filing of the following types of Liens: Pre-Liens, Notices to Owner, Medical Liens, Construction Liens, Mechanics Liens, HOA Liens, 20 Day Preliminary Lien Notices, and more.

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What Is a Property Lien?

What Is a Property Lien?

A property lien is a legal declaration on assets that permits the holder to acquire access to the property if liabilities are not paid. This type of lien is required to be filed and authorized by a state agency or county records department. It is then presented to the property holder with specific conditions notifying them that measures have been taken to repossess a portion of property.

Primary Property Lien Takeaways

  • This type of lien is a declaration, legally on assets that permits the holder to acquire admission to the property if liabilities are unpaid.
  • Property liens can be allowed for repossessing property like a vehicle, jet ski, or even a house should the owner default on mortgage payments.
  • Usually, these types of liens are the last step a creditor is going to take to collect an unpaid liability.

How Property Liens Work?

These liens can be utilized by creditors in a multitude of situations. A creditor is required to file and receive authorization for a property lien through a state agency or county records department. Each jurisdiction has their own regulations and rules overseeing property liens.

A property lien can be awarded for repossession of a real estate property, vehicles, jet ski’s, or equipment. A tax lien is able to also start a legal claim by the government to the property of a taxpayer in which might include financial institution accounts, vehicles, and real estate. A lien is usually the initial step a creditor is going to take to confiscate property. It presents an announcement to the debtor that measures are being brought about. Levy is also terminology related with a lien and is the real act of confiscating property. This could bring about a sheriff’s sale.

Creditors and Property Liens

This type of lien is usually the last step a creditor is going to take to collect an unpaid liability. The awarding of a property lien typically occurs following numerous attempts have been made to collect the liability through an external or proprietary liability collection agency. It can be an ideal way for debt collectors to collect what they are owed. It can also cause significant trouble for the borrower.

In the case of a real estate property, creditors might decide to acquire a first-order property lien following several missed payments have happened on a mortgage loan. A creditor has definite rights to the property in which is utilized as collateral towards the mortgage loan. Consequently, creditors can readily acquire a property lien on a mortgaged property in arears. These liens indicate that the creditor is looking to foreclose on the property. When a debtor is unable to pay, the creditor has total rights to the home when an initial lien has been awarded allowing priority for repossessing the real estate property for reselling for paying off the liability.

Dar Liens Offers Lien Processing and Filing in Arizona

Dar Liens Offers Processing and Filing of the following types of Liens: Pre-Liens, Notices to Owner Medical Liens, Construction Liens, Mechanics Liens, HOA Liens, 20 Day Preliminary Lien Notices, and more.

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Types of Liens

Types of Liens

There are 3 general kinds of liens: statutory, consensual, and judgment.

Statutory

Every statutory lien result from state and federal laws. They typically occur automatically and are deemed as involuntary liens.

Liens don’t have to slow you down. Read below and see how you can work out this financial issue.

Tax Liens

You are going to have a tax lien when you owe back taxes to the Internal Revenue Service, and they put a lien towards your property. This is not simply a consequence of outstanding federal income tax. You might additionally have a lien placed towards you because of outstanding property and/or estate taxes.

This is a general lien that the government places towards your property when you do not pay your tax debt.

Mechanic’s Liens

When a contractor and/or mechanic works on your property that you are owner of and you decline to pay them, they could put a mechanic’s lien towards your property.

When you are the contractor in this case, placing a lien can assist you in getting your money. You are able to file a lien in specific cases and guarantee that you get your money for your work being a general contractor and/or a mechanic.

Home-Buying Liens

Wanting to purchase a home? Home-buying liens might be a hurdle.

This kind of lien could also impact you when you are the property owner wanting to sell your property. In this case, you are on the opposite side of the lien. However, the new owner’s payment is going to typically meet your liability to the loan and eliminate the lien.

Consensual

As the name suggests, consensual liens are intentional. Each party must agree on them for consensual liens to begin.

Purchase-Money Security Liens

This is fancy terminology for when borrowers use credit from a lender to purchase property. This property protects the credit. Kinds of purchase-money security liens comprise of home mortgages, vehicle loans, and other purchases of property concerning a credit agreement.

Non-Purchase-Money Security Liens

This type of lien is the opposite of purchase-money security liens. The lender presently owns property, and they utilize it as protection for borrowing. One instance is for a 2nd mortgage or for refinancing a mortgage.

Judgment Liens

Judgment liens come from lawsuits. Judges put this kind of lien on a defendant’s property. It grants the judge the authority to foreclose.

This is the most horrible kind of lien to deal with, so stay away from it, whatever you do.

Dar-Liens Offers Lien Processing and Filing in Arizona

Dar-Liens Offers Processing and Filing of the following types of Liens: Pre-Liens, Notices to Owner Medical Liens, Construction Liens, Mechanics Liens, HOA Liens, 20 Day Preliminary Lien Notices, and more.

Read More
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