What Is A Lien, And What Is Its Purpose?
In the real estate business, a lien can often be a powerful instrument. A lien is essentially a right to keep possession of any property owned by someone else until a debt owed by that individual is discharged. A home usually can’t be sold or refinanced until the lien on it is cleared. Liens can easily arise at some of the most inconvenient times, so it’s important to check if you do have such an instrument on your home.
Three Categories Of Liens
Liens typically belong to one of three different categories.
These types of liens come about after homeowners hire contractors for home improvement projects (renovations or remodeling work) but ultimately neglect to pay them for services and materials used. Mechanics liens can be filed on land, buildings or real property like equipment, air conditioning systems, and other fixtures.
These types of liens are filed as a result of unpaid taxes, including local property tax liens and taxes filed by the IRS for missed federal fiscal payments. According to the National Tax Lien Association (a nonprofit), only around 6% of delinquent tax liens result in foreclosure. Of these, only 0.5% are not redeemed before the foreclosure is complete. Also, more than $14 billion in property taxes goes unpaid in the United States.
These arise due to court cases where the final ruling states that you (the homeowner) owes money to the other party involved in the home transfer or sale transaction. These can include settlements pertaining to child support, medical payments and unpaid credit card debt.
“Liens can become an issue for everyone involved, particularly if the total liens on a property add up to more than the contract price,” says Klaus Gonche, a real estate agent with Re/Max in Fort Lauderdale, Florida. If so, “the seller will have to bring cash to cover the difference at closing. If the seller lacks the cash available for this, the buyers will have to either help clear the lien with their own funds or walk away from the deal.”
Ensure A Thorough Search With A Title Company
A professional home title company should be able to help you conduct a thorough title search in order to ensure you have a “clean” title devoid of any taxes or encumbrances resulting from the previous owner’s negligence.
If you’re a homeowner who hired an economically unreliable contractor for a renovation project, there are laws that permit subcontractors to file a case against you and your property. A title company can guide you through any ensuing legal proceedings by creating a defense argument.
The Timeline Of A Lien
The process of filing a mechanics lien, for instance, usually varies by state, so you should always be properly informed on what your state’s specific requirements are. In some states, you must first inform the property owner and other parties of any outstanding debts before actually starting any filing. You should also work with an attorney or a local county office to ensure you include a filing fee, meet all formatting requirements, and attach all necessary documentation.
A mechanics lien also usually carries an expiration date, so you should be vigilant and take enforcement action before this date. A mechanics lien claimant also has the option to file a lawsuit to have a property sold at auction and then recover the debt from the proceeds.
Speak To A Professional Title Company
Speak to the experienced professionals at Mathis Title Company in Fairfax, Virginia, to learn more about how to check for liens on a house and how they can assist you with any legal issues that may arise should a subcontractor come after you.
Mathis’s agents will guide you through the filing process and ensuing statutory steps to filing a mechanics lien by using their extensive knowledge of lien laws in the state of Virginia. Whether you are a homeowner or a contractor who is legally owed money for work performed, Mathis Title Company is here to ensure your rights are protected, so be sure contact them online for a free consultation.
Robin Mathis is a prolific attorney who was sworn into the United States Supreme Court. She boasts more than 35 years of experience in both the buyer and seller sides of real estate transactions. She has dealt with both residential and small commercial property cases, as well as estates. Ann Andreatos, who works with Robin, is a licensed title agent with more than 14 years of experience. Among the areas Mathis serves are Alexandria, Arlington, Chantilly, Fairfax, Great Falls, and McLean.