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Discover what LIENS mean in Real Estate

What do liens mean in Real Estate?

New week, new word! Today, we’ll talk about a specific legal term you might have already encountered: “liens.” A lien is simply the right of recovery. It allows a person, company, or institution to claim somebody else’s property if debts are not paid. In other words, it’s a sort of security interest to ensure the fulfillment of an agreement.

There are different types of liens and several forms to get rid of them. We’ll get to that in a minute, but first, note that they are not good or bad news per se: their purpose is to provide security. They are required to ask for a loan and, if everything goes according to plan, you (as a lienor) will never notice them. And, in case it goes south, they’re there to assure the lienee its payment. Liens are often listed in public records to inform other lenders that there are existing debts.

How liens work

Let’s say you want to buy a house, but you don’t have enough money. You go to the bank and ask for a loan. Besides giving you the funds, the bank asks you for collateral, just in case you fall behind on your mortgage payments. This way, they reassure that the debt won’t remain unpaid. In case you fall behind, they could opt to reclaim the asset to settle the contract. It’s important to say that liens are the last resource to collect money.

Liens can be executed on houses but also on cars or boats –they are against assets and not people–. They limit what the owner can do with them until the debt is settled. And their origin can vary according to the situation.

Where do liens come from?

There are different types of liens, depending on the context in which they are placed. In general, they can be divided into consensual and non-consensual (or voluntary and involuntary), subjected to the agreement’s nature. They can also be separated into specific (attached to one particular asset) and general (where the creditor can claim any of your property).

The four most common liens are:

  • Foreclosure lien: both parties agree to put a lien on the property that it’s about to be bought. If payments are not fulfilled, the entity can file for a lien to regain its investment.
  • Tax lien: in this case, a government puts on a lien on your assets because of unpaid taxes (though they first inform you in writing your obligations).
  • Mechanic lien: this type protects contractors, builders, and suppliers from not being paid by homeowners. For it to be effective, it’s required to file some paperwork. Breaches of contract also contemplate compensation.
  • Judgment lien: if someone suits you and wins, he or she might file a lien against your property to collect their compensation.

Can liens be removed?

Here we have the million-dollar question: whether you’re thinking about asking for a loan or you’re behind on your taxes, there might be a fear of not being able to remove this. First of all, note that if your property has a lien against it, it’s possible that you need to solve it before doing whatever you want with it. How do you do that? Here we have some ideas:

  • Pay it off: the most straightforward way to put it in the past is to pay your debts. It sounds obvious, but it’s still true. Once you do that, make sure to file a Release of Lien form as evidence of payment.
  • Settle: if you don’t have enough money to pay it off, you can try to negotiate it. Sometimes, creditors are willing to hear options that will allow them to collect their money quickly.
  • Get it corrected: there’s a possibility that you don’t believe the lien is correct. In that case, the best thing is to do a little research. Contact the lienee and find out its origin; maybe there was a mistake, and it’s not your debt to pay.
  • Dispute it: if you still believe the lien is wrong but can’t convince the lienee, you might need to initiate legal action. Try to gather as much information as you can so you avoid surprises on the way.

Disclaimer: The blog articles are intended for educational and informational purposes only. Nothing in the content is designed to be legal or financial advice.


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