Learn about the legal definition of a lien and its meaning in the US legal system. Plus, we answer these questions and more in this article:
What are the different types of liens? Do they expire? Can liens be dismissed? Do liens affect property ownership?
Get these answers and the best FAQ info today!
What Does Lien Mean in Legal Terms?
A lien refers to a claim or legal right a person, organization, or entity has on someone else’s property. Liens usually come into the picture as a means of security for loans, mortgages, or any obligation one party has towards the other.
If the party cannot repay or fulfill the obligation, the lienholder has the right over the property until this is cleared or satisfied.
A lien is a means to protect the rights of the creditor to encourage their willingness to lend.
What are the Different Types of Lien in the US?
The laws about liens can vary from one state to another. There are different types of lien in the US legal system, and these are:
- Mortgage Lien
- Mechanic’s Lien
- Tax Lien
- Judgment Lien
- HOA Lien
- Consensual Liens
A mortgage lien is when a person, organization, or entity pledges their property as collateral for a loan. If the borrower is unable to repay, the lender has the right to foreclose on the property to satisfy the debt according to the mortgage lien.
Mechanic’s liens are filed by contractors, subcontractors, or suppliers who have provided resources, such as labor and materials, for construction/renovation projects.
If the project owner fails to pay them or fulfill the contract, then the contractors can file a Mechanic’s Lien against the owner and lay a claim on the project.
A tax lien is levied by government agencies, such as Internal Revenue Service (IRS) when citizens fail to pay their taxes. With the tax lien, the government gets a claim over the individual’s property to recover the tax amount.
A judgment lien comes into play to safeguard the rights of the creditor. If the borrower fails to repay the creditor due for any reason, they can place a claim on the property and obtain a judgment lien for the same.
Judgment liens not only apply to land properties and assets but to bank accounts, vehicles, etc.
Also known as the Homeowners’ Association’s (HOAs) lien. Homeowners’ associations (HOAs) can utilize this lien to collect the due amount if a homeowner violates the association rules or fails to pay the association fees.
For homeowners who do not pay, the HOA most often enforces the lien when the owner sells the property, and the owed payments come from the sale amount. HOA liens can make it challenging to sell a home or condo.
These are the liens that the borrower willingly enters. Typical examples include mortgage loans and other lines of credit. The lender will have rights over the asset until the amount has been completely repaid, commonly in installments.
What is a Claim of Lien?
A Claim of Lien refers to a legal document establishing the lienholder’s right to another individual, group, or entity’s property or assets. This may be as a part of a monetary agreement between the two parties, where the asset acts as a means of recovery for the lienholder if the repayment is not made.
A claim of lien is usually filed in the county/jurisdiction where the property is located and is a public record of the lienholder’s interest and, thereby, right on the property.
This document alerts the owner of the property or interested buyers that there is a lien existing on the property, and the sale, refinance, or subletting of the property may be subject to repayment conditions of the debt or until the lien is dismissed.
A claim of lien document usually requires the following information:
- Lienholder Details: This outlines the information of the lienholder. This may include the name, contact information, and other details such as representing attorney’s details.
- Property Information: This includes the location or address of the property, the type of property, any & all identifying factors, and the owner’s details.
- Debt, Obligation, or Contract Details: This includes details regarding the nature of the contract or obligation between the two parties. It may be the money that the lienholder has provided, the terms of repayment, work performed by the lienholder, materials & resources provided for a project, any other services, and more.
- Timelines: It is also essential to include the time period which is applicable for the debt recovery. The timeline can consist of:
- The commencement of the project or the time when the lienholder provided the amount.
- The due date of the debt.
- Other conditional clauses regarding the lien.
- Signatures: The document concludes with the lienholder’s signature or any organized personnel.
Note: Please note that this is some general information included while filing the claim of lien. There could be more information required based on the county or jurisdiction, and it’s always advised to consult a good attorney on the same.
What is a Municipal Lien?
Municipal liens are imposed on a citizen by a municipality (city, town, or local government), usually for unpaid debts or obligations owed to the municipality. The unpaid money can include property taxes, utility bills, or charges for any violations. This lien is a public record and gives the municipality a claim on the property until the dues are cleared. The expiry of municipal claims and related rules vary from one jurisdiction to another.
How Long Does a Lien Last?
The duration and expiry of a lien mainly depend on the type of lien and from one jurisdiction to another in the US. For instance, according to Texas State Law Library, a judgment lien lasts for 10 years but can be renewed for another 20 years if the owed amount remains unpaid. Similarly, tax liens can stay on a citizen’s record for 10 years.
Liens may also have a short duration, such as mechanical liens that last for 90 days. In addition, the state of Texas keeps 4 year period for a Homeowners’ Association (HOA) Lien. In some states, judgment liens can also be renewed if the amount has not been repaid.
Is There a Statute of Limitations on Liens?
The statute of limitation for filing and enforcing liens varies on different factors such as:
- Lien type
- The laws of the specific jurisdiction or county
- Nature of the debt or obligation
It’s best to check with an attorney on the period & process for filing liens that concern your jurisdiction.
Do Liens Affect Credit Scores & Reports?
Yes, certain types of liens can have a negative impact on an individual’s credit score and reports. This comes from the fact that claims of lien documents are public records and can be accessed by credit agencies and organizations.
Usually, consensual liens don’t impact credit scores negatively unless the individual is unable to repay the loan and the creditor secures the collateral as a result. On the other hand, having liens such as mechanic’s lien, tax liens, judgment liens, and more in one’s name can harm the credit score and report.
How Much Does it Cost to File a Lien in the US?
The filing cost for a lien can vary on factors such as jurisdiction or county, type of lien, attorney’s fees if you have one, and more.
For instance, filing for a mechanic’s claim in Florida depends on the paperwork required and starts from as little as $10, with an additional $8 for subsequent pages.
In contrast, mechanics liens have a higher base cost in Texas, with the base amount being $26 for the paperwork and an additional $4 per each subsequent page in the filing.
Can a Lien be Removed or Discharged?
Yes, it is possible to remove or discharge a lien. Liens can be discharged under many circumstances, some of which include the following:
- Debt Completion or Payment: The simplest way a lien is removed is when the creditor is repaid the amount due by the borrower. When the obligation is fulfilled, the lienholder files for a release or satisfaction of the lien document, which removes the lien from public record and clears the borrower of any obligation.
- Dispute Resolution: If there is a disagreement regarding the monetary value due, the lien can be dismissed if both parties arrive at a mutually agreed-upon amount.
- Court Process: The property owner may be able to file for bankruptcy to have the debt discharged. Additionally, in select cases, the property owner can dispute the validity of a lien, challenge it, and get it removed altogether.
- Expiration: Many types of liens have expiry dates. Although most are resolved when the payment is duly completed, many liens can expire past the designated period according to the laws.
Does a Lien Waiver Need to be Notarized?
No, it is not mandatory to notarize a lien waiver except in 3 states. These are Texas, Wyoming, and Mississippi.
How Does a Lien Affect Property Ownership?
A property with a lien claim over it may affect the ownership adversely. For instance, it can create an encumbrance on the property’s title, which can prevent the owner’s freedom to sell, transfer, or refinance the property without addressing the lien. Potential sales can be obstructed since buyers usually hesitate to purchase a property with a lien.
How to Find a Lien on a Property?
Since property liens are public records, you can easily find the record of them in the county clerk’s (sometimes named a property assessor) database. You can accomplish this by visiting the county clerk’s office in person.
Many jurisdictions have property records online, allowing you to carry out an online search of the database by filling out the property’s address info.
Written by Aaron R. Winston
Last Updated: May 24, 2023 7:03am CDT