Do You Have A Lien On Your Property?
Are you looking to sell your real estate property but you can't due to an unforeseen lien? Or what about purchasing a commercial real state building with a lien on it? At Equity Legal LLP, we can help you answer these questions and become secure in what is the right decision to take for your legal situation.
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Real Estate Liens And Encumbrances
What Is A Property Lien?
A lien is a notice that is affixed to a piece of real estate that serves to show that a creditor is owed money. Before you can sell a property and transfer a clear title, you must get rid of the lien by paying it off. The following information gives you a better idea of what types of liens can be attached to real estate.
Types of Real Estate Liens
Two types of real estate liens may be attached to a property. They are voluntary liens and involuntary liens.
Voluntary liens are created by an agreement between a debtor and creditor. The most common type of these liens is a mortgage. A mortgage represents a loan that is secured by using the property as collateral. The bank retains ownership of the real estate until the mortgage is totally paid. Therefore, this type of voluntary lien is known as a property lien.
Whenever you purchase real estate, you promise to pay back the amount by signing an agreement. If you default on the loan, you promise to give the creditor the right take your house. If you do not pay your mortgage, the creditor is in his or her legal right to foreclose on your home. Because you pledged the house as security, he or she is allowed to follow suit.
Involuntary liens are not created by the property owner. In this case, many are represented by construction liens or tax liens.
Tax liens, which are imposed by the government, are based upon property taxes that have not been paid. You cannot sell real estate until the back taxes are paid.
Construction liens result from renovations that have not been paid. For example, if your hire a contractor to perform an upgrade and he fails to pay one of his subcontractors, the subcontractor, legally, can file a lien on your property for breach of contract. When this happens, a dispute between the homeowner and contractor normally develops. The lien, also known as a mechanic’s lien, is considered a cloud on your real estate title.
A creditor is allowed to place a lien on real estate after he or she sues and wins a judgment in court. When this occurs, the lien is called a judgment lien. In California, a judgment lien can be placed on a debtor’s real estate, such as a condominium, land, or house. A child support lien is another type of judgment lien that may be placed on a property. Neither lien can be imposed on a homeowner until it is approved by the court.
The Differences Between Liens And Encumbrances
Sometimes liens are confused with encumbrances. While a lien represents a financial claim against a property for the payment of a debt, an encumbrance is a broader term – one that refers to any type of claim against a property.
If you are still confused as to what type of lien you are dealing with, or how it affects your property, please reach out to our team of expert legal attorneys who can assist you on your legal matter.
Attaching A Lien To A Property
To attach the lien to real estate, the creditor either takes or mails an Abstract of Judgment to a county recorder’s office where the property is owned. In California, a judgment lien remains attached to property for ten years. Even if the property is transferred to someone else, the lien remains attached.
The ability to collect on a judgment lien in California is affected by several factors, including the following:
- The amount that cannot be touched if the property is considered a debtor’s primary residence (known as a homestead exemption)
- Other liens currently in place
- Foreclosure or bankruptcy proceedings
Sometimes, when searching a title, you may find mistakes. Some of the more common issues involve the following:
- Recording mistakes, which affect the survey or deed for your property.
- Unknown liens – many of which emerge with distressed real estate.
- Illegal deeds or deeds that were made by someone who lied about his or her marital status, or who is a minor, or an undocumented immigrant.
- Missing heirs, which can affect your rights to a property.
- Forged documents.
- Unknown encumbrances in the form of third-party claims, or non-financial claims, such as covenants, which restrict use.
- Unknown easements, which can affect your enjoyment of a property.
- An unknown will.
- A false claim of ownership.
Any of the above title mistakes can be avoided by taking out title insurance when you purchase a property. Play it safe when it comes to liens, encumbrances, and other discoveries that may have been previously unknown. Consult with a lien real estate attorney to make sure your property is free and clear of any defects or liens.
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More Information Regards liens & Specific Situations
Whey buying real estate, you need to have any existing liens removed before you can obtain financing. A title search is performed to show whether a property has a lien. It also shows whether the seller is the recognized owner. A legal description is given, along with any details regarding a lien or other title encumbrances.
Perfecting a Lien
Usually, the law requires a creditor to “perfect” a lien by officially recording it. The purpose for this action serves two purposes. It provides notice of the lien to the other party and establishes a lien record in case a lien’s authenticity is questioned. Once the debt is paid in full, the creditor, legally, must remove the lien.
Selling Real Estate Encumbered by a Lean
Laws prevent the selling of a property with liens. Therefore, to sell a property, you first need to get rid of the lien. In addition, you need to consult with a lien attorney in San Diego.
Paying Off the Lien Amount
If you pay off the debt, the lien can be released by the creditor. The creditor files the release at the same place the lien was recorded. Once the lien is released, you can sell or transfer the real estate.
Transferring a Property without Removing the Lien
The law does not require that a lien be removed before a title to a property can be transferred, or even sold. However, a lien still needs to be cleared if the purchaser requires financing or wishes to possess a clear title.
The Importance of a Clear Title
Naturally, if you own property, you want to make sure your title is free and clear of any liens. You do not want someone else to claim a portion of your real estate. When someone else can lay claim to your property, the property’s value also diminishes. Buyers pay sellers less who cannot provide real estate with a clear title, provided you can even find a buyer.
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