Oct 17, 2008

All About Liens

Various types of liens - monetary claims against a property to secure an obligation or debt of a property owner - can be placed on property. A lien is an encumbrance on the title to a property and can affect a property owner’s ability to sell.

The most well known example of a voluntary lien placed on a property by its owner is a mortgage. The most well known examples of an involuntary lien placed on a property by another party include a property tax lien and an income tax lien – both from parties with valid monetary claims against the property owner.

In some cases, an unsatisfied lien can force the sale of a property in order to satisfy the lien. This is commonly seen today with lenders foreclosing on property owners who have defaulted on their mortgage.

Mortgage A voluntary lien placed on a property by its owner as collateral on a home loan with a lender. This could be a first mortgage, second mortgage or line of credit. If the borrower defaults, the lender can force the sale of the property to satisfy the debt.

Property Tax A lien placed on property by municipal governments for unpaid property tax. Property tax becomes a lien on the property as soon as it is assessed. A property tax lien is superior to all other liens.

Special Assessment A lien placed on property by municipal governments for an unpaid special assessment, a public improvement that improves the property such as new curbs or sidewalks. A special assessment becomes a lien on the property as soon as it is assessed. A special assessment lien is second only to a property tax lien.

Construction A lien placed on property for unpaid material or labor that added value to a property (unjust enrichment). Also known as a “mechanic’s lien”.

Judgment A lien attaching to property when a judgment is obtained against a property owner. The lien is against all property of the debtor in the county where the judgment is recorded.

Income Tax A lien on all property owned by the taxpayer at the time of filing including all future property acquired until the lien is satisfied.

Estate Tax A lien against the deceased’s taxable assets upon death. Also known as “death tax”.

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