Contractors and Liens
A lien is a claim to property for the payment of a debt, typically one connected to the property. Because a lien is something that is filed with the local recorder’s office, it can be a powerful legal tool. It is a public record, available to anyone, that alleges a valid, unpaid debt against the specific real estate named in the lien.
There are several types of liens, all of which could cloud the title and prevent the seller from conveying marketable title to the buyer. In some states, a mortgage is regarded as a lien, not a complete transfer of title, and if not repaid the debt is recovered by foreclosure and sale of the real estate. Real estate can also be affected by liens for federal income taxes. Additionally, liens can be placed on property for the non-payment of real estate taxes and special assessments, including homeowners’ association dues. Contractors, subcontractors, material suppliers, and laborers can place liens against property for the value of work or materials installed on that property. The filing requirements and statutes of limitation for these liens vary according to the law of each state.
The word lien, derived from the French, means”knot or binding.” The person to whom the debt is owed, the one who binds the property, is known as the lien holder. In certain circumstances, the lien holder may foreclose on the property if the debt is not paid in full. Liens can generally be removed by the payment of the amount owed. This payment can occur at any time up to and including the stage at which the closing documents for the sale of the property are signed.