Creditors have a lot of collection weapons in their arsenal, but a property lien is one of the most feared. Property liens create major hassles for both the property holder and any parties interested in buying the underlying assets. If you’re up against a property lien, you probably have a lot of questions. Don’t worry, we’re here to help. Stay tuned to find out everything you need to know about property liens, tax liens, and more.
How to Define Lien
A lien is a claim placed against an individual’s or business’s assets. Liens give the lienholder the legal right to seize and sell the undersigned property to satisfy the debt. An owner cannot sell, refinance, or transfer the underlying asset without the consent of the lien holder. Lenders can only issue liens for certain types of debts, including tax liens, mechanics liens, mortgage liens, and lawsuit judgment liens.
Lien on Property
Real estate is one of the largest assets an individual can own. Which makes it a likely target in the event a lien needs to be placed to collect a debt. When a lien is filed on a property, the lien is bound to the property, so the lien stays with the property even if it changes hands. It doesn’t follow the original debtholder after the sale. This can make the sale or transfer of a property difficult, as most people do not want to take on the extra debt associated with the lien. Most states have their own rules regarding liens. In the state of California, liens can stay on a property for a total of 10 years.
Lienholders sometimes use foreclosure sales to enforce their right to payment. If the property has multiple liens, they’re paid on a priority basis. Tax liens usually have the highest priority, so they get paid first. Mortgage liens come next, and so it goes until all the liens get paid
Are You Notified if a Lien is Placed on Your Property?
You won’t typically receive a notice if someone puts a lien on your property. However, if it gets that far, you probably know about the debt already. You will undoubtedly receive collection attempts and lawsuit notices. You can also conduct a title search to find out whether your asset has liens against it. Title searches determine who legally owns the property, and the title report includes information about any liens on the property.
How Do You Get a Lien Removed?
Liens usually create a lot of red-tape, and it becomes harder to sell, refinance, or transfer your property if you have one. Ideally, you should remove the lien before you attempt to enter into a transaction. However, you should ensure the lien is a valid claim before you start forking over your hard-earned cash.
The most obvious way to remove a lien is to pay it. Paying your lien is the simplest solution, but you might have other options. You should try to negotiate more favorable terms with the creditor at the very least. If the lien is invalid, you can remove it via court order. However, you have to appear in court and present evidence to support your claim.
Avoid Tax Problems
The best way to defend against a property lien is to file accurate and timely tax returns. We’re not attorneys, so we can’t help you with lien issues. However, utilizing a professional accountant can greatly reduce your chances of receiving a lien. Get started today with a one-on-one strategy session with a Shared Economy Tax. You can also sign up for our newsletter for more complimentary tax tips.