How Liens Work? Can Liens Impact Your Property?


Lien in simple words could be defined as a legal measure where a creditor holds the right to claim the rights over a property if the loan remains unpaid after the stipulated time. The property, therefore, acts as a security interest for the creditor. The lien will therefore act as an ultimate security guarantee for the debt recovery if the creditor is unable to secure payment from the borrower. It will also allow the lender to seize the property or force the sale to secure the payments and satisfy the debt.

Lien on a house can be a factor to many problems while you try buying or selling the property. Even if you are the homeowner you have to understand how a lien will impact the proceedings of the property and what are the several ways to deal with it or remove the lien altogether.

What is a lien and how does it work?

Lien is a legal right granted to the creditor or lender which helps to secure their financial interests. The lender has the right to put a lien on a property and this lien will automatically be lifted once the debt is paid. But in a condition when the homeowner Is unable to pay the debt, the creditor will have the right to recover the debt with the sale or seizure of the property. This means that the homeowner does not have the full stake on the property until the lien laws remain active and instead the lender shares the stake in the property.  A construction lawyer explains how there happen to be several title search companies who actively help people who are closing down on a property and uncover issues such as a lien on that property which could affect the rights of the buyer to sell the property. If in any situation the title company unfolds the lien clause on a property then the buyer and the seller will have to figure out how the lien issue will be resolved before the sale of the property happens.

Also Read: What Does A Construction Lawyer Do And When Do I Need One?

Types of liens: voluntary and involuntary

Lien is of different kinds which are slightly different with their terms and clauses and put a different type of restrictions on the borrower and different power for the lender altogether.  The lien could be split into two broad categories- one is voluntary and the other is an involuntary lien. There is often a lien that you opt for as an agreement between you and the bank from where you have borrowed to purchase a property. Also, a creditor could voluntarily opt to put a lien on your property if you own him a balance and he needs a sense of security let us further discuss a few common types of lien

·        Tax lien

A tax lien is a condition when you fail to pay property tax or income tax and even after being notified in writing by the government agency you fail to pay the amount. This is when the government could take an action against you and put a lien on a house you own in the effort to recover the debt.

·        General judgment lien

This is a very basic type of lien where a creditor when unable to secure the payment takes the lender to the court and wins the case. So the judge might allow him to secure the payment through the forced sale of the property.

·        Mechanic lien

This type of lien is put by a contractor when he is unable to secure the payment for the construction or renovation work he has done.

How to get rid of a lien

The most secure way is to repay the balance as soon as possible and get rid of the lien on a house you own. If unable to repay the lien one can try to formulate the terms of the lien through proper law procedure.

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