A lien is a legal document used to collect a debt owed by a property owner that puts a hold on selling and refinancing. The property owner has a problem until a lien release is filed. The release is a document that cancels the lien. The release, sometimes known as a lien waiver or satisfaction, can be absolute or conditional. A conditional release is contingent upon some future event with the property on hold until all conditions are met. An unconditional release is effective immediately.
Unconditional Liens Require Payment in Full
The standard mortgage is a lien. Release of a mortgage is always unconditional because it requires payment in full unless the mortgage secures multiple properties and a partial payment will release part of the property. In that case, the partial payment secures an unconditional release for the given property. Given a choice, a homeowner would always choose an unconditional lien release because it brings finality. The unconditional lien means the homeowner's property is free and clear.
Conditional Lien Releases Involve Contingencies
Construction loans usually involve progress payments from the homeowner to the contractor. As the contractor completes part of the construction, partial payments are made for the work completed. The builder uses unconditional lien releases as a means of ensuring payment in a timely manner. The homeowner takes the unconditional release to the lender. The lender then issues the check to the contractor. Upon receipt by the contractor, the condition of the lien release is met.
Liens Often Prevent Sales, Loans
For the homeowner desiring to clear title to his property, a lien has the effect of preventing that from happening. A homeowner will find it difficult to sell his home as long as there is a lien on the property. In addition, a bank will not give you an equity line of credit. The unconditional lien release is the document that frees up the property.
Releases Must Be Filed to Be Effective
Just like a lien, a release must be filed in the same office with the lien. Never assume that the release has been filed. Sometimes the lien holder files the release, but often it is mailed to the property owner who must then file it. It has no effect if it sits in a drawer. It must be made a part of the public record. When in doubt, contact the appropriate county office where the original lien was filed. The lien release must be signed by someone who is authorized to release the property.
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