Real Estate - July 12, 2022
Updated for accuracy, comprehensiveness and freshness on June 17, 2024.
If you are a homeowner or are looking to become a homeowner, you have probably heard about a lien. But you may be asking yourself, “What is a lien on a house? How does it apply to me?” It’s important for you to understand what it is, who can put a lien on your house, and what your obligations are regarding this part of home ownership.
We’ve gathered some of the most essential information for you to learn what you need to know about liens on houses!
What is a lien on a house?
A lien is a legal claim against a property. If you are advanced in your mortgage, your lender may put a mortgage lien on your house so that your lender has the right to reclaim your property if you default on your payments. It’s not just banks or other financial institutions that are able to put liens on houses. Small businesses and even government agencies can place liens on your property as well.
Involuntary liens exist as well. Let’s say you contracted a construction company to build your new home. If you have failed to fulfill your financial obligation to pay these contractors, they can file a lien with the county or state agency. In this case, you did not initially agree to have this lien placed on your property, but the contractors are within their rights to place one.
What happens when a lien is placed on your home?
When a party with legal interest in your property places a lien on your home, this lien enters the public record in the county where the house in question is located. You will have more trouble trying to get a mortgage, refinance, or sell the house once the lien is placed on it. You need to finish making your required payments first. Once the lien is lifted, it will be much easier for you to do what you want with the property.
If you have fulfilled your financial obligations and the lien has been lifted, make sure the public record reflects this fact. Sometimes outdated public records can cause delays if your lender still sees a lien in place—even if it is wrong.
As a home shopper, you want to ensure that records don’t show a lien on the house you are considering. Not only would a lien slow down the process of you buying the house, but it could also make it harder for you to refinance down the road.
Home sellers have options about how to manage a lien on their house before they try to sell it. Sellers can pay the lien upfront if they have the money to do so, or they can negotiate or dispute the lien with the help of a lawyer. Sellers can also include the debt of the lien into the total house sale settlement. This is done by asking the creditor for a payoff letter and giving this letter to an escrow agent as they determine the sale proceeds.
Who are the entities that can issue liens on residential property?
As we previously mentioned, it’s not just the bank that can place a lien on your property. These are some of the other entities who are entitled to put a lien on your house:
- The government: The government can place a lien on your property if you owe real estate taxes. This 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 them off, or your lender can pay the taxes and add that amount to your mortgage debt.
- Your Home Owners Association: An HOA can place a lien on your house for unpaid fees or fines. HOA boards are even able to foreclose on houses with unpaid fees and fines.
- Creditors: A creditor could be the party collecting on your credit cards, medical bills, or personal loans. They can sue and get a financial judgment against you, which your creditor can use to place a judgement lien on your house.
- Attorney fees: If you hired a lawyer and did not pay their hefty fees, they can file a charging fee. They can only do this if it was stipulated in your contract with them (which it usually is).
- Contractors: Contractors can file a mechanic’s fee within six months of you failing to pay them. They must sue to enforce the lien within one year, though this can vary from state to state. If they win the lawsuit, they may be able to force the sale of your home.
- The IRS: The IRS can put a lien on everything you own if you don’t pay your back taxes.
- Child support/alimony: Ex-spouses or ex-partners 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 or refinance your property. Or you ex can force a lien sale.
How can you go about managing and resolving home liens?
The easiest way to get your lien removed is to pay it off. If you don’t have all the money you need, you can negotiate with the lien holder for a reduced settlement, and perhaps pay less than what was originally owed.
Make sure the creditor formally releases the lien from your property, and obtain a copy of the “release of lien” for your records. Ensure that your release of lien has been filed with the correct agency!
If you can’t pay off the lien, you can also consider stripping the lien via bankruptcy or even getting a court order to remove it. If it’s a federal tax lien, you can also wait for the statute of limitations to end.
If you are considering fighting a lien on your property, it would be wise to consult with a lawyer. This is where LegalShield comes in!
For a fraction of the cost of other lawyers’ hourly fees, you can speak with an experienced LegalShield provider lawyer who will answer your questions specific to the removal of your property lien. We put you in touch with a LegalShield provider law firm in your area, so you have legal answers and assistance when you need it most.
Take the next step
If you are worried about a lien on your property, worry no more with LegalShield’s help. You don’t have to deal with this complex issue alone. Contact an independent associate to find out more about how LegalShield can assist you with real estate problems and other legal issues.
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