A property lien is a legal claim on real estate property that grants another party some right to it. Liens essentially tell others that the property is being used as collateral in a loan or financial obligation.
Property Liens Defined
Specifically, a property lien is a notice on a piece of property that grants someone—such as a lender or creditor—a legal claim to that property if outstanding debts or obligations aren’t paid. For example, a bank lending money to a home buyer in the form of a mortgage has a lien on the property being purchased.
Not all liens on a property are necessarily detrimental. For instance, a homeowner who makes all their mortgage payments has nothing to worry about from their lender.
Liens must be dealt with before the property can be transferred to another party. In the case of a house, that typically means making sure the mortgage is paid off before the title can be transferred to a buyer.
Types of Property Liens
Property liens come in two categories: voluntary liens and involuntary liens.
Voluntary Liens
A voluntary lien is one made with the consent of the owner, such as a homeowner or a company in charge of commercial property. A typical example is a mortgage, in which the buyer/owner agrees to put up the property as collateral in exchange for a loan. The lender holds onto the lien, which gives them the right to repossess the property and sell it to recoup their losses if the borrower fails to fulfill their financial obligation.
Involuntary Liens
Most properties have voluntary liens on them, but there are circumstances where an involuntary lien may be generated on a property. In the case of an involuntary lien, the creditor doesn’t need the property owner’s permission to generate a claim on the property.
Common examples of involuntary liens include:
- Property tax liens, which occur when the owner fails to pay property taxes.
- Contractor’s liens, in which an unpaid contractor gets a lien against your property.
- Child support liens, for those who owe large sums for child support or alimony.
- Judgment liens, which occur as the result of a lawsuit filed by the creditor.
Handling Liens on Your Property
Odds are that if you own real estate property of any kind, you’ll have a voluntary lien on that property in the form of a mortgage. That in and of itself is not usually a concern as long as you make payments on time.
However, involuntary property liens can be problematic. Fortunately, they don’t typically result in immediate seizure of the property. Illinois laws have various protections in place on property owners, and creditors typically need to follow specific procedures in order to enforce their claim to your property. For example, a home that acts as your primary residence cannot be seized if you have less than a certain amount of equity in it.
The best way to handle property liens is to prevent them by being prompt with repaying all debts and financial obligations. Failing that, a real estate attorney can help you navigate the process, make negotiations, and protect your rights.