What is a lien (also called a security interest)? Are there different types of liens? Furthermore, what is a lien release?
Mechanic’s Lien
Everyone pays the piper. If you had some plumber or carpenter work on your home, you need to pay them. If you don’t pay them, then they can level a lien against your property (called a mechanic’s lien).
What does this do? It forces you to pay the outstanding bill before you can sell your property. Mechanic’s liens can arise from the present owner, previous owner or a contractor.
If you do not pay the workers for their services or materials, then they can levy a mechanic’s lien against your land. Each state will vary, but in general, mechanics have 60 to 90 days to file a lien against your property.
What can mechanics do if you don’t pay up? If you still don’t pay, then the mechanics can file a lawsuit.
Banker Lien = Mortgage
You might have heard of the banker’s lien, normally known by the name of the mortgage. Have you heard about “mortgaging your future?” With a mortgage, which is a type of lien, you are incurring a debt where others make a legal claim on you.
With a mechanic’s lien, you hired the workers, which was the act that gave the workers the right to make a claim against your property. When you signed your mortgage, you gave the bank the right to make a claim against your property.
If you miss even one mortgage payment, the bank can enforce its lien with foreclosure. This banker’s lien allows them to take possession of your home.
Warranty Deeds
One of the functions of the general warranty deed is to guarantee that there are no liens from the previous homeowner. The special warranty deed guarantees that the present owner has not incurred any liens, but makes no promise concerning the previous occupant.
Quitclaim Deed
While the quitclaim deed can be very fast, it does not offer any guarantee that there are no liens on the property. Why? Because oftentimes, there is still a mortgage on the property, which is a type of lien.
Lien Release
Before you sell your property, you must pay off the liens. Once you finally repay your mortgage, the lender is required to send you a lien release within 30 days. A lien release means that the lien has been removed.
If you pay off the mechanics, then they can also give you a lien release. Thereafter, you can legally sell your property.
Jim Treebold is a North Carolina based writer. He lives by the mantra of “Learn 1 new thing each day”! Jim loves to write, read, pedal around on his electric bike and dream of big things. Drop him a line if you like his writing, he loves hearing from his readers!