Liens Against Property

A lien refers to a claim against specific property, that entitles the lien holder to lawfully possess the erstwhile owner's property until the latter has fulfilled his/her financial obligation towards the former.

A lien refrains the owner from selling or transferring the property unless the dues are paid in full. The obligation may be with regard to payment for the work done on the property, or repayment of debt for which the property is a collateral.

Sometimes, the government may place a lien against property owned by a taxpayer with the intention of recovering the unpaid taxes. A lien holder's claim against a property is not subordinate to that of other creditors. Liens can be general or particular.

A particular lien is one where a person claims the right to retain a property on account of spending time, labor, and money on it. General lien, on the other hand, results in a lien holder claiming personal property to satisfy a debt. The property that gave rise to debt, or one that was collateralized, is not the property seized in lieu of settling the debt.

For the sake of claiming a lien, the claimant needs to be registered or licensed as per the state requirements. The claim of lien needs to be filled out, signed, dated, notarized, and recorded. Proof of Service of Claim of Lien has to be prepared to convey that the counter party has been served a copy of the claim of lien.

Not every lien against property is enforceable, since a direct connection between the debt claimed and the property subject to a lien is often required in case of individuals/businesses.

Typically, individuals and businesses can lay a claim on the property if they have worked to improve upon the property, or have extended a loan for which the aforementioned property acts as a collateral.

Liens against property can be voluntary or involuntary. For instance, in most states, a mortgage creates a lien on the title to the mortgaged property. Such a lien is voluntary, since the homeowner avails a mortgage loan to buy a home. The loan, in turn, has to be repaid in regular installments consisting of principal and interest payments.

Failing to do so, will result in the mortgage lender foreclosing the property in order to recover the dues. Tax lien foreclosures are involuntary since they are a consequence of unpaid Federal and State taxes.

Unpaid income and sales tax result in the government auctioning the property to the highest bidder in an attempt to recover the dues. Tax lien foreclosures provide a wonderful investment opportunity, since the government often sells the property at a price that is just sufficient to recover the taxes.

State laws may also result in custodial parents having enforceable liens against property in lieu of unpaid child support. In fact, a divorce may result in a spouse retaining ownership of the marital home, while the other having a lien on the property to the extent of the spouse's interest in the property at the time of divorce.