What Is a Lien?

Tuesday, 02 Nov 2010 01:47 PM

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A lien is the legal right to keep something belonging to a person who owes money, until their debt has been paid. Though a lien does not help recover the money right away, it secures one’s standing as a creditor who has to be necessarily paid from the proceeds, if the property is sold or refinanced.
 
Property Lien
A property lien is nothing but a legal right over a property. A property lien is filed against a property to establish a security interest in the property.   Creditors (lenders) at times file property liens if the borrower does not repay the debt.
 
Real Estate Lien
If a real estate lien is filed against a property, the property cannot be sold. For example, one can have a real estate lien put on the property the debtor owns if he or she is the judgment debtor (you have won a judgment against them in a court of law). The real estate lien gives you the right to be paid a certain sum of money from the proceeds of the property.
 
Car Lien
To purchase a car, many seek financing from banks, etc. The bank co-owns the car in such cases. It protects its financial interest by placing a lien on the car it has financed. The bank’s car lien will be in effect until the borrower settles the loan fully. After repayment of the loan, the bank’s financial interest in the car ceases. The bank withdraws the car lien. 
 
Mortgage Lien
A mortgage lien is a legal claim against a mortgaged property. The mortgage lien must be paid when the property is sold. It is a claim on the property used to secure a loan. The holder of the mortgage lien has a claim to the property if the borrower does not repay the loan. The priority of the claim is decided by the order of recording and any subordination agreements. Naturally, a first mortgage has a prior claim over all other mortgage lien holders. 
 
Mechanic’s Lien
A mechanic's lien seeks to guarantee payment to contractors, subcontractors, and suppliers. They must have rendered services on an improved piece of property in line with the terms of a contract. If the contractors, subcontractors, and suppliers have completed the work as laid down in the contract but have not received their payments, they can file a mechanic’s lien within the stipulated period upon completion of the work, under the laws of the state concerned. The mechanic's lien applies to the structure and the land beneath the structure. Until the debt is settled, the landowner cannot get a clear title to the property. 
 
Tax Lien
Tax lien indicates the government’s right to possess a property when the tax due is not paid. Tax lien conveys the government’s right to seize the property. The government notifies this right by placing the tax lien.

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