Liens are generally a bad thing if you’re the person having one placed against your property. There are many different types of property liens. In the broadest sense, a lien is a third-party financial interest in a specific property. Some liens are voluntary, granted by the property owner — such as a mortgage. Other liens are involuntary and are granted by courts or taken by government agencies.

A lien tells the world that a creditor claims you owe them money. A lien is typically a public record. There are many types of liens that can be attached to possessions that you own such as automobiles, boats, and RVs. In this article, we are only discussing liens that attach to real estate that you own. When someone puts a lien on your real estate, that property effectively becomes collateral for the debt. To sell or refinance the property, you must have a clear title. A lien on your property clouds your title. To clear up the title, you must clear the lien. So, creditors know that putting a lien on a property is an almost guaranteed way of getting what they're owed — sooner or later.

5 Common Creditor Property Liens

Some liens are a common and expected part of being a homeowner such as a mortgage that was already mentioned. Other liens can potentially cause problems with buying or selling the property. Whether you’re already a homeowner or planning to purchase a property, make sure you understand how a lien can impact the property and how to get a lien removed.

1. Property Tax Lien. This is one of the most common. If your property taxes are not paid the county or other tax authority can place a lien against your property. This is more likely to happen to a person who outright owns their home or property than it is to a person paying a mortgage. Almost every mortgage company collects and pays property taxes as part of the monthly mortgage payment. However, when an owner fails to pay their property taxes the tax authority can and will place a lien against the property. If tax liens go unpaid for long enough (determined by the county of state), the government can order a sale of the property to recoup unpaid taxes, plus interest and penalties.

2. IRS Lien. This is another government lien but at the federal level rather than the local tax authority level. The IRS can file a lien against a property owner who fails to pay their income tax. This might apply in some states with income taxes as well. IRS liens are not limited to only your real estate. The IRS can also file liens against other possessions such as cars and boats. If these liens remain unpaid, the government can file to foreclose in an effort to satisfy their lien.

3. Child Support Lien. Mostly self-explanatory. Courts can order liens against your property when you fail to pay court-ordered child support. 

4. Mechanics Lien. If you hire someone to work on your property and fail to pay them according to the terms of your agreement, they can file a mechanic’s lien against your property. These liens can also be filed by vendors who supply materials to a work site.

4. Judgment Lien. These are various claims against a person’s property that are awarded by a judge when the property owner has lost a lawsuit and failed to pay the winner. If you get sued, lose, and don’t pay, the claimant can file liens against your assets — including real estate. You won’t be able to sell or borrow against the property without paying the creditor first. And in some cases, if you fail to satisfy the lien, the lienholder can file for foreclosure.

What You Can Do to Remove a Lien

There are generally two ways to get a lien removed from the title of your property. 1. You can contest the lien in court and if you can prove it is not a valid lien, the court will remove it. 2. You can work with the lienholder to settle out of court. Typically, settling out of court will require you to pay all or much of what the lienholder says that you owe them.

Here is what you or an attorney can do to have a lien removed.

1. Thoroughly understand the terms of the lien. This includes any and all contracts or agreements supporting the reason why the lienholder placed a lien on your property. You may be able to find some points to negotiate a lower settlement.

2. Make payment to the lienholder for the amount you both agree is owned.

3. Draw up a lien release document and have the lienholder sign it — giving up their interest in your property.

4. Have the signed lien release recorded at the local county recorder’s office to remove the lien from your property.

What Liens Get Paid First

When a property with multiple liens is sold or foreclosed on, each lienholder typically has a right to the proceeds. Usually, liens will be paid according to when the lien holder recorded their lien. The first person to have recorded their lien will be paid first, and so on. 

In almost all cases, the first lienholder is the first or senior mortgage holder (aka purchase-money mortgage). You may also have fallen behind on your payments for a second mortgage or home equity line of credit (HELOC). Another possibility is you have fallen behind with homeowner association (HOA) or condo fees. These will generally be third in line behind the first and second mortgages.

However, other lien types, such as property tax liens, may take priority regardless of when they were recorded. As with most legal rules, there are exceptions. When it comes to real estate, depending on state law, some liens, such as property tax liens, mechanic's liens, and homeowners' association and condominium association assessment liens, get priority over previously recorded liens. If you are in trouble with multiple liens, you almost certainly need the help of an experienced attorney.

Keep in mind that not all liens are bad liens. For example, as long as you pay your monthly mortgage payments, your mortgage lien probably won’t have too much of an effect on your daily life. Your mortgage should also keep your property taxes up to date. However, many types of liens do put your property at risk, so it’s important to get them resolved as soon as possible. Even if the lienholders decide not to foreclose, these liens can make it impossible for you to sell your home or refinance your mortgage.

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