A property lien is a public record indicating that a property owner is in debt to a person or agency. You must file a property lien with the appropriate state agency or court, oftentimes after winning a judgment. The exact procedure varies by state and the type of lien.
Types of Property Liens
A property lien is a claim that a creditor has against the debtor's property. It's a public record that any interested party can look up. Real property liens, which are liens on real estate, are a common type of lien that typically must be paid off before a house is sold or at the closing from the seller's proceeds. Another type of property lien is a personal property lien, which is filed against personal property and not real property. Personal property includes a car, boat, or other type of property that you own that isn't real estate.
Filing Judgment Liens
If you successfully sue someone and get a money judgment from the court, in many states, you can turn that judgment into a real property lien by filing a copy of it with the county real estate records office. In California, for example, you file a judgment lien with the office of the assessor-recorder in the county where the real estate is located. Alternatively, you might be able to record a personal property lien by filing a copy of the judgment with the appropriate state agency in your jurisdiction, often the attorney general's office. Frequently, the court that entered the judgment must certify the filed copy or the abstract of judgment by affixing an original, official stamp or seal on it. Not all states have the same procedures for creating a lien out of a judgment; talk to a lawyer or look at your court rules for more information.
Read More: What is a Judgment Lien?
Filing Other Liens
For some debts, you don't have to win a court judgment to file a property lien. For example, federal and state taxing authorities file tax liens without going to court. Likewise, in many states, a parent who is owed child or spousal support can file a lien against the non-paying parent without going back to family court. Additionally, a person who performs work on a building or a piece of equipment or machinery can file a mechanic's lien for unpaid costs and fees. The document you need to file – sometimes termed a notice of lien – varies among states. Additionally, if you give a mortgage (which is a type of lien) in exchange for a loan to buy a house, the lender will record the mortgage with the recorder of deeds. If you get a loan to buy a car, the lien is typed onto the car title.
Effect of a Property Lien
A person buying property generally insists on clear title. Title is not clear if there are liens filed against the property. Therefore, a property seller usually uses part of the sales proceeds to pay off the lien amounts to provide the clear title demanded by the buyer. In some cases, such as in a foreclosure, a creditor holding a lien can force the sale of the property, but this can be a time-consuming, expensive and uncertain procedure, especially if other large liens were filed earlier on the property as they would have priority. If a lien is not paid off, it usually terminates after ten years, unless renewed.
For a lien to be enforceable against others, you must record the appropriate documents with the county register of deeds or recorder of deeds in the county where the property is located. Car liens are indicated on the car's title.