Lien

LIEN

A right given to another by the owner of property to secure a debt, or one created by law in favor of certain creditors.

A lien is an encumbrance on one person's property to secure a debt the property owner owes to another person. The statement that someone's property is "tied up" describes the effect of liens on both real and personal property. Lien is a French word meaning "knot or binding" that was brought to Britain with the French language during the Norman Conquest in 1066.

Real Estate Liens

In many states a mortgage is regarded as a lien, not a complete transfer of title, and if not repaid the debt is recovered by foreclosure and sale of the real estate. Real estate is also affected by liens that favor local, state, and federal governments for real estate taxes and special assessments; state and federal governments for income and sales or use taxes; condominium and homeowners' associations; and general contractors, subcontractors, material suppliers, and laborers for the value of work or materials installed on real estate. The filing requirements and statutes of limitations for these liens vary according to the law of each state.

Perhaps the riskiest move a purchaser of real estate can make is to buy without making certain that there are no liens on the property or without obtaining title insurance against liens on the property. In many states liens are secret: that is, they are hidden from the public records until required to be filed.

The priority of liens on a construction project relates back to the first visible commencement of the work. This line of law makes the last work, perhaps landscaping, equal in priority to the first, excavating. This means that during the entire work of construction, the owner must obtain waivers of lien from each subcontractor and material supplier. Without these waivers the real estate is subject to liens of all such claimants, if the general contractor, though paid in full, fails to pay them. A waiver is a voluntary relinquishment of a known right. Waivers of lien must be in writing, give a sufficient description of the real estate, and be signed by the one claiming a lien. No payment need be made if the claimant agrees to release the land from the lien and rely only on the credit of the owner or general contractor for payment of the debt.

Lien claimants are protected in this way because all their materials and labor are "buried" in the real estate, having become part of it. They cannot be reclaimed without irreparable damage to the property. Unlike mortgage liens, the liens of these claimants, called mechanic's liens, offer no redemption in a foreclosure judgment.

Other Liens

The published statutes of a state usually have a section on the topic of liens under which is listed most or all of the liens allowed by state law. A great number of persons in trade or business obtain liens for their services to personal property: garage keepers and warehouse owners for unpaid rent for storage; automobile mechanics for repairs; jewelers; dry cleaners and furriers; artisans for restoration of art objects; bankers; factors dealing in commodities; and many others. Not to be outdone, attorneys have a lien for their fees and may retain clients' files—perhaps containing vital information or documents needed by the client for work or family affairs—until the fees are paid.

A judgment lien can, when entered by a court after a suit, affect all the real and personal property of one who fails to pay a debt, such as a promissory note to a bank, credit card balance, or judgment for injury the person may have caused. In some states the lien of a properly docketed judgment affects all the debtor's property in every county where notice of the judgment is filed. State law governs the length of time such liens survive—which in some states is as long as ten years. Judgments can be enforced by executions and sale of property until the amount due is satisfied.

Courts of equity have the power to create so-called equitable liens on property to correct some injustice. For example, one whose money was embezzled may obtain a lien on the wrongdoer's property by suing for a constructive trust.

Discharging a Lien

Liens are discharged after a certain length of time. The requirements for commencing their foreclosure vary among the states. If a person pays and satisfies a lien, she should be careful to obtain a written, legally sufficient release or satisfaction, and file or record it in the appropriate government office, so that her title and credit reports no longer show the encumbrance.

cross-references

Title Search.