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Problems With Property Liens

From a business perspective, a is a claim against a particular property. Those claims usually belong to the individual who is owed a debt, generally a mortgage lender or the producer of a loan. Also known as "security interests", a lien may be a consensual agreement or it may be involuntary.

  • Consensual lien - A lien is a consensual agreement if the lender and the borrower agree that the borrower's property will have a lien placed on it from the onset of the loan.
  • An involuntary lien - A lien is involuntary if the government or an individual licensed to create a lien is forced to do so as a result of a defaulted payment or associated financial error.

A lien on a property title often comes as a result of a property owner's debt and inability to pay off necessary payments. These payments include:

  • Unpaid federal and state taxes
  • Unpaid child support

Another instance in which a lien may be placed on a home is if there is a divorce case. Sometimes one spouse will be granted ownership of the marital home, with the other spouse granted the right to place a lien on the property that is valued at the spouse's interest in the property at the time of the divorce.

If a debtor owner fails to pay his or her debt, and the lender goes to court to obtain a judgment, the creditor is usually on the debtor's real property. Lawyers hold the right to file charging liens and retaining liens on a client's holdings in an effort to guarantee payment for their services.

What Liens Do

Liens work differently in each state, so it's important that you don't read the laws pertaining to liens in Oklahoma if you're living in Ohio. As such, there are certain undeniable truths pertaining to liens that ring true in each of the United States' 50 states.

  • Liens prevent property owners from selling or transferring the ownership of the property unless the lien has been paid or taken care of in another way.
  • Liens enable those claiming the lien to go forward with foreclosure measures. If necessary, they are entitled to sell the property in an effort to pay the lien claimant's debt.
  • Liens establish priorities among competing creditors trying to claim interest in the subjected property.

Property liens give attorneys the right to a piece of the judgment awarded to a client. It can cover costs associated with loses, or costs associated with court and filing fees. Most importantly, a lien means that the individual who placed the lien on the property holds a claim in the final settlement amount of the property.

In that respect, liens are problematic to homeowners because they restrict what the homeowner can do with the home. A property owner cannot sell or move a house and reap the full benefits, because the lender owns a certain percentage of any settlement that may be made on the home.