We like to think our home is our castle. But that is not always the case, particularly when a lien has been placed on your property, and you are the last to know. To be fair, a lien is placed to collect an unpaid debt, but that does not mean your own home should be used as collateral. To avoid this situation, let’s review the different types of liens that can be placed on your property, and what you could do about them.
What is a lien?
Let’s start by defining what a lien actually is. A lien is a legal claim, attached to your property, which puts others on notice that you owe a creditor money. Before you can sell your property and give clean title to your buyer, you must pay off that lien.
What are the different types of liens on a house?
A voluntary lien
A mortgage is a good example of a voluntary lien. Here, the owner of the property—or the debtor—voluntarily gives the bank—or creditor—a legal claim to the property until that mortgage has been paid off.
An involuntary lien
Some creditors, however, can file liens against your property without your consent. This is an involuntary lien, and in most cases exists because a pre-existing law gives a creditor a lien on your property when you failed to pay a debt.
Judgment lien
A creditor can also sue, win a judgment against you and file that judgment in the county records office. Filing this judgment creates a lien on your property.
Common entities that may put a lien on your home
Real estate taxes
The government can place a lien on your property if you owe real estate taxes, and be forewarned, a property tax lien takes priority over all other mortgages and liens. If the taxes are not paid, the government can sell your home to pay the property taxes. Or, your lender, to protect its mortgage, might pay the taxes and add that to your mortgage debt.
Creditors
Holders of unsecured debt, such as those collecting on credit cards, medical bills, and personal loans can sue and get a financial judgment against you. With that in hand, a creditor can then place a judgment lien on your home.
Attorney fees
A lawyer can file a charging lien for unpaid legal fees only if this is stipulated in your contract with that lawyer (which it usually is).
Contractors
If you fail to pay a contractor, he or she can file a mechanic’s lien. In most states, the contractor must file the lien within six months of non-payment. The contractor then must sue to enforce the lien within one year, though this can vary from state to state. If the contractor wins the lawsuit, he or she may be able to force the sale of your home.
The IRS
If you don’t pay your back taxes, the IRS can put a lien on everything you own, including your home.
Child support/alimony
Your former spouse or partner can put a lien on your property if you owe substantial child support or alimony. The lien will stay until you pay what you owe, refinance your property, or your ex-forces a lien sale, whichever happens first.
How do liens affect homeowners?
An unpaid lien can affect a homeowner in several ways, and none of them are good. You could lose your property if a sale is forced due to an unpaid lien. Plus, your credit rating can take a serious hit, since judgment liens and mechanic’s liens are reportable to the credit bureaus, and factor into your repayment history.
How do liens affect sellers?
A lien placed against your property may prevent you from selling the property. A buyer should beware of a home with a ‘clouded’ title, and no bank will issue a mortgage to a property with lien placed against it.
How to have a lien removed
One way to get the lien removed is to simply pay it off. Toward that, you can negotiate with the lien holder for a reduced settlement and pay less than was originally owed. Either way, make sure the creditor formally releases the lien from your property, and be sure to get a copy of the ‘release of lien’ for your records. There are a number of other ways to remove a lien—strip the lien via bankruptcy, wait for the statute of limitations to end, and, in certain cases, get a court order to remove it.
If you are considering fighting a lien on your property, it would be wise to consult. with a real estate lawyer first, which is where LegalShield comes in. Within as little as 4 business hours, you can speak to an experienced lawyer who will answer your questions specific to the removal of your property lien—or many other real estate issues—for a fraction of what a traditional law firm would charge. There is never a retainer or hourly fee to ask your legal question. Just experienced, legal answers, when you need it.
