Liens on Properties

by Gilbert Manda ; Updated July 27, 2017
A lien means your property can be used to recover debt.

A lien is the right to retain possession of the property of a debtor until the owner fulfills a legal obligation. For example, the creditor might place a lien on your property for the value of your debt until you pay. The real estate is used as collateral against the debt once a lien is placed on it. If you fail to pay the debt, the real estate will be used as a source of payment.

Voluntary Liens

You can voluntarily place a lien on your property; this is known as a mortgage lien. Homeowners do that for various reasons, including mortgage loans for financing improvements to their property. When you use your real estate as collateral, the creditor has a legal claim on your property. If you sell the property, you must use some of the proceeds to settle the debt.

Involuntary Liens

Many liens are involuntary. For instance, if you have unpaid property taxes, authorities might place a lien on your real estate. If you don't pay for the work done on your house, the company or person who did the work might place a construction or mechanic's lien on your real estate. If you are awarded judgment for unpaid child support, you can attach the arrears as liens to the property of the debtor. There are many ways a lien can involuntarily be placed on property. The idea is to persuade the debtor to pay.

How to File a Property Lien

The process of filing a real estate lien depends on the jurisdiction. Generally, the creditor has to send specific notices to the debtor, informing him of the intention to place a lien on his property. If the debt is not paid after all the notices are sent, the creditor can seek a legally binding lien on the debtor's real estate. This might involve filing legal documents with the court or county clerk's office, depending on the location.

Removing Property Lien

Once the debt is paid in full, the lien on the property can be released. In some jurisdiction, a lien can expire after a certain period of time. Once that happens, judgment on the lien becomes void and the creditor no longer has claim against the property. The creditor has no choice but to execute a document that releases the lien in some states, which must be filed with the appropriate authorities. A lien release means the creditor no long has a claim on the debtor's real estate.

About the Author

Gilbert Manda has written financial news since 2000. He holds a professional diploma from the London School of Journalism, a Bachelor of Science in global business and public policy from the University of Maryland and a Master of Arts in international journalism from City University London.

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