A lien on a house is a legally recorded claim against your property that secures a debt. Unless you pay the debt and have the lien removed, you may be unable to sell or refinance your home. There are several different types of liens that creditors can file, and you may find that there are subtle differences when you try to get them removed.
What Are the Different Types of Liens?
There are four basic types of liens:
- Property liens: When you take out a first or second mortgage or home equity line of credit, it’s an automatic lien on the home from the lending institution. Co-op owners are subject to UCC-1 liens. If you default on any of these loans, the bank has the right to foreclose on the property.
- Tax liens: You may also find liens on your property if you fail to pay your property taxes or income taxes, which includes federal, state, and city taxes. The liens usually include the past-due taxes, as well as penalties and interest. While a tax lien can also lead to foreclosure, the lien generally sits on the home until the debt is paid.
- Mechanic’s liens: If you fail to pay for the services of a gardener, plumber, electrician, or other types of home contractor, you may find yourself with a mechanic’s lien on your home. Be careful when signing contracts, as you may unwittingly give a contractor the right to file a lien without going to court if you don’t pay.
- Judgment liens: Anyone you owe money to can file a lawsuit. If they win the suit, they can ask that a lien be placed on your home. This is true for credit card companies, as they would also need to go to court in order to file a lien.
These are the most common type of lien, but they’re not the only ones. If you have a significant number of parking or moving violations, the Motor Vehicle Department can issue a lien on your home. Though you probably won’t lose your home over it, the lien will show up in a title search.
You can also find yourself in hot water if you don’t adhere to the local housing code or you have environmental control board violations, such as not fixing a home hazard or letting garbage pile up on your property. The laws on liens vary from state to state. In California, for example, anyone who owes unpaid child support or alimony may wind up with a lien on their home.
Will I Be Notified When a Lien is Put On My House?
You generally won’t be notified that there’s been a lien put on your property. However, you will have received bills and notices of nonpayment prior to that time, as well as paperwork letting you know that a lawsuit has been filed in court.
How Can I Tell If There is a Lien On My House?
You can head down to your county courthouse and talk to the clerk about searching for liens, but there are simpler ways. A title company can easily prepare a report that will cost you some money but save you a lot of headaches. Your mortgage holder should also be able to tell you if there are any liens on your property other than the mortgage itself.
Are Tax Liens Easy to Remove?
Though it may sound counter-intuitive, federal tax liens are generally easier to avoid and remove than state or municipal liens. The IRS would rather work with you to pay off the debt than take your property, even though it filed 708,000 notices of federal tax liens in 2012 alone.
If you have a tax lien from the state, county, or city, you could find yourself in hot water. With budget shortfalls the norm, it’s not uncommon to find a city or county foreclosing on a house just to get a tax debt of a few hundred dollars satisfied. The laws regarding state tax liens also vary from state to state, making things even more complicated. In some states, a tax lien can attach to any property a person owns, including vehicles or other assets. If you’re faced with tax liens, start talks with the IRS immediately but pay off the smaller state and municipal debts first.
Is It Possible to Have a Lien Filed for Money I Don’t Owe?
It’s not unusual for homeowners to pay a contractor for work done on the home, only to find that the contractor didn’t pay the subcontractors he hired. In this case, you could find yourself with mechanic liens on your home for the amount of money owed to each of these subcontractors.
There are several ways to avoid this. You can have the contractor issue you an affidavit of payment. This lets subcontractors sue the contractor but not you. You can also ask the contractor for lien waiver for each and every subcontractor and the contractor himself. The most surefire method is to pay each subcontractor individually instead of trusting the contractor to do it.
How Do I Remove a Lien?
If you have a lien on your home as the result of money you owe, then pay the debt and the claimant will lift the lien. If you believe a lien is bogus, go to the courthouse and get a copy of the case file. If the papers weren’t served properly or they weren’t served on time or anything on the papers is wrong, simply write to whoever filed the claim to let them know the lien isn’t valid.
If a subcontractor files a mechanic’s lien on your home, then he has up to 12 months to start a lawsuit. If he does not, then the lien disappears. You can speed things up by filing a notice of contest with the court. Once you do that, the subcontractor has 60 days to file a lawsuit or the lien goes away.
