For most people, buying a home is the single largest purchase they will make in their lives. Owning your own home can provide a sense of peace and financial security, making it well worth the money you invest in it. But that security can be threatened by the presence of a lien against your home, so it’s important for a homeowner to understand what it means when the issue arises.
Voluntary liens
Regardless of the type, a lien is a legal right or claim against property. It is a statement, by a creditor, that the homeowner owes them money, and they will maintain the claim on the property until the debt is satisfied. While most types of liens are involuntary, the most common lien is voluntary – the home mortgage. When a home buyer borrows money from a lender, they voluntarily give the lender a lien against the home in exchange for the borrowed funds.
Involuntary liens
Involuntary liens are imposed upon a homeowner without their consent. Unpaid taxes provide the basis for a common involuntary lien. When property taxes are not paid, municipal governments can place a lien on the home until the debt is satisfied. If the debt is unpaid federal income tax, the IRS can impose a lien. A tax lien can often take precedence over any other existing lien.
Judgement liens are imposed by a court. If a creditor chooses to sue a debtor and is successful in their suit, the court can issue a lien in the creditor’s favor. In the worst case for the homeowner, a judgement lien can allow the creditor to take possession of the home if the debt remains unsatisfied.
Construction liens are those placed upon the home by contractors or sub-contractors. A construction lien can be imposed for unpaid work or materials provided and creates an encumbrance on the property, making it difficult to sell or refinance the home. For this lien to be valid, there are specific notice and timing requirements the contractor must adhere to.
