Generally speaking, a lien is a claim a person, a company or a lender makes on your property when you owe them money. Some liens, such as a mortgage loan, home equity line of credit (HELOC) or home equity loan, are voluntary, meaning they are given with the consent of a homeowner.
Involuntary liens, on the other hand, are placed on a property without the consent of the homeowner. For example, you may have a lien placed on a property because you didn’t pay a creditor or a contractor.
No matter the type of lien you’re dealing with, you’ll likely want to take care of it sooner rather than later. After all, liens can create problems for you later on, including impacting your ability to sell a property or even presenting legal issues down the line. There are a few ways to remove a lien on your property, including paying the debt, running out the statute of limitations or going to court.
Why should you remove a lien on your property?
According to New Jersey attorney Rajeh A. Saadeh, liens are a cloud on title, which means they are a problem with your ownership of the property. When you have a lien against your home or other property you own, Saadeh says that the lien holder may have the right to get paid from your sale of the property or even to “compel the sale of your property to satisfy the lien.”
Generally speaking, a lien against a property can also make it extremely difficult (or impossible) to sell or refinance. A lien can also open the door to future foreclosure of your property if you never repay your debt.
How to remove a lien on property
There are plenty of ways you can get a lien removed from a property, although much of your strategy will depend on the type of lien you have and the circumstances surrounding it. If you need to remove a lien so you can sell or escape further financial consequences, consider these options.
Pay off your debt
One simple way to remove a lien on a property involves paying off the owed debt, whether it’s a mortgage or a judgment lien placed on your property by a creditor. When you pay off your debt, you are eliminating the need for the lien and paving the way for the lien to be extinguished.
While you can pay off the full amount of the debt, you may also be able to negotiate a lower amount and have the lien released for less than what you owe.
Fill out a release-of-lien form and have the lien holder sign it
If you’ve paid the lien holder after the lien was placed, you can fill out a release-of-lien form and ask the lien holder to sign it in front of a notary. From there, you can file the release-of-lien form at your county recorder’s office, although you may have to pay a fee to do so.
Run out the statute of limitations
The rules vary in every state, but you may be able to wait out your lien if you give it enough time. Every state has a statute of limitations rule for different kinds of debts, including liens against property. In many states, property liens run out with a statute of limitations after 10 years.
Some states also have a statute of limitations on how soon a lien must be filed. For example, some states limit how much time can pass before a contractor can no longer place a mechanics lien on your property.
Get a court order
Homeowners with a lien who believe that the lien is invalid can ask a court to remove the lien. A judge can issue a court order to have a lien removed if the homeowner has proof that the lien is not valid or if a lien has expired because it has lasted beyond the statute of limitations in your state.
Make a claim with your title insurance company
Finally, don’t forget that you have options if the lien is invalid and you bought title insurance when you purchased a property. Saadeh says that if the lien is not your responsibility, you may have a claim to raise with your title insurance company, which can work with you to resolve the issue.
Alternatives to removing a lien
If you’d like to avoid the process of removing a lien, there may be other ways to get the lien out of your life.
According to Saadeh, you may be able to sell a property with a lien “if the buyer is willing and able to buy the clouded title.” However, the price will likely be much less than what it would be if the title was clear.
In other instances, filing for bankruptcy could lead to an underlying debt for a lien being extinguished. Even through bankruptcy does not remove liens directly, having an underlying debt wiped away could cause the lien to be removed as well.
When to get a lawyer involved
According to veteran real estate investor Christopher Burgelin of We Buy Houses Fast, LLC, you should involve a lawyer in the lien removal process when “you are being harmed” or when you don’t want to deal with it all on your own.
An example of “harm” could include a situation where you cannot sell or refinance a home due to a lien, where the lien holder is trying to foreclose on the property, where a lien was invalid to begin with or where a lien has run out of the statute of limitations but creditors are still trying to collect.
Real Estate Attorney David Reischer of LegalAdvice.com says that it is typically a good idea to speak with an attorney to assess the options that may be available depending upon your circumstances as well.
“An attorney is usually much more sophisticated to know how to negotiate the removal of a lien when there is an opportunity for compromise between the parties and when the alternative is that the creditor could possibly receive nothing,” he says.
The bottom line
If you are dealing with a lien on a property you own, you do have some options available to you, including paying off the debt you owe so you can move on. Either way, it’s smart to take steps to deal with liens placed against property you own before they become a problem.
If you feel overwhelmed by a lien and you don’t know what to do next, don’t be afraid to seek legal counsel for advice. A real estate attorney can answer your questions and provide you with the best course of action based on where you live, the type of lien against your property and the specifics of your situation.
Source: Bankrate / Featured image by gpointstudio – freepik.com