Discharging a Property Lien
What is a Lien?
A lien is where one party retains the lawful possession of the property of another for the payment of a debt. This usually occurs when the property owner has missed one or more payments. The lien basically allows the creditor to obtain possession of the property if the debtor cannot make payments for a loan.
Liens are legal documents that are enforceable in court and accessible in public records. The right to place a lien on another person’s property usually arises by operation of law, though in some cases the right is created by express contract. Having a lien on one’s property generally has a negative effect on the marketability of the property.
A common form of lien is a mortgage, which can be levied against the property owner if they fail to make payments. Thus, the property becomes “burdened” or subject to the lien. Other types of liens include:
- Property liens (real estate)
- Contractor’s liens
- Divorce lien
- Judgment liens (used to pay awards issued in a court ruling)
- Tax liens
Can a Lien be Discharged?
Yes, there are some circumstances where a lien can be discharged, or removed from the title. If the lien is discharged, the title and the county records will no longer state that there is an encumbrance on the property title. This will serve to restore the marketable title, making the property once again favorable for sale or purchase.
- Discharge by payment: This is a satisfaction of the debt owed through an actual payment. Payment can occur at any time, even up to the closing sale of the property. If the lien is satisfied, the property holder should be careful to obtain a written confirmation of the transaction and record it in the county recorder’s office. Thus, the title and other documents will no longer reflect the encumbrance. This type of discharge is also known as a “release”
- Discharge by expiration: Liens are often subject to discharge after a certain period of time. The time frame usually differs from state to state. If there is a time limit on the lien, it must be renewed by the creditor, or else it will expire and will no longer exist in the title.
- Discharge by debt forgiveness: In rare instances, a creditor may simply choose to forgive the debtor and relive them of the duty to pay the debt. In this case, the lien will be removed according to the wishes of the creditor. Again, a written statement or contract should be created so that there is a record of the discharge.
Thus, there are several possible ways that a lien can be discharged. In addition to the types of discharge mentioned above, a lien might also be discharged by operation of law or by order from a judge. This may be the case if the debtor has committed a violation of law in connection with the lien (i.e., fraud or coercion)
In any case, the most important part of discharging a lien is to ensure that the property owner obtains a written confirmation of the discharge. The document should be signed and dated by the party who initially imposed the lien on the property. Preferably, an attorney should draft this document, since it has legal significance and may be used as evidence in court should a dispute arise.
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Last Modified: 05-08-2013 11:27 AM PDT