A lien holder is a person or an entity/organization who holds an interest in an item of property. Usually, the lien is granted as a condition attached to a loan; a common example of this is with a mortgage. Here, the borrower obtains the loan but the lender may be granted a lien right, which grants them certain rights in the event that the borrower defaults on the payments
A lien holder does not hold title to the property itself. However, they are granted certain rights regarding the property, namely, a share in the sales in the even that the loan is not paid off and the property is sold. Lien holders generally cannot place themselves onto the title in order to obtain ownership.
Thus, the main right of a lien holder is to have priorities from the proceeds of a sale in the event of a default on payments or a foreclosure
A junior lien holder is a person or entity who obtains a lien interest after there is already an existing lien on the property. The most common example of this is with mortgages. Let’s say you take out an initial mortgage on the property, which is associated with a lien. Then, several years later, you may decide to take out a second mortgage on the property.
This second mortgage lender might be called the junior lien holder, while the initial mortgagor would be called the senior lien holder. This can happen with other subsequent mortgagors in the event of multiple refinancing events, with each lien holder being considered as a "junior" to the previous lien holder.
In a foreclosure proceeding, lien holders receive some proceeds of the sales. This is done in the order in the order of seniority. Thus, the senior lien holder (the first mortgagor) gets paid first, then the next junior lien holder, and so on. There is a chance that a lien holder who is far down the line of payment might not get paid at all if there are no more funds left.
You should note that junior lien holders have the ability to initiate foreclosure proceedings, however, the senior lien holders will still be paid first. Many lien and foreclosure disputes have to do with this order of payment during the foreclosure proceeding. Legal remedies may include damages awards or court orders requiring the payments.
Liens can sometimes be complex and may require the assistance of a lawyer when dealing with them. You may need to hire a real estate lawyer if you have any questions regarding lien holder rights. Your attorney can explain how liens work and what types of laws might affect your claim. Also, if you need to appear in court, your lawyer can represent you and guide you through that process.
Last Modified: 11-19-2014 04:12 PM PSTLaw Library Disclaimer
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