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 makes against the debtor's property. It's a public record that any interested party can look up. The real property lien is 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 that's filed against a car, boat, or other type of valuable personal property that a debtor owns by holding title to it.
Filing Judgment Liens
If you successfully sue someone and get a money judgment from the court, 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 can make it 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. In California, it costs about $25 to file an abstract of judgment and about $20 to have it recorded.
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 dead-beat parent without going back to family court. Also, a person who performs work on a building 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 consent to a lien in exchange for a mortgage to buy a house or a loan to buy a car, it is filed immediately with the records office or appropriate state agency to create a property lien.
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, 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.