Financial Encumbrances – Liens

A lien is a financial claim against your real property that provides security for a debt or obligation. This means that, if the lien is not paid, the lien holder (person you owe the debt or obligation to) can go to court and ask that the property be sold to pay the lien. This is called foreclosing on the lien. The lien attaches to the property and stays with it, even if the property is sold to someone with no knowledge of the lien. The person who holds the lien is called the lienor.

Liens can be voluntary or involuntary. A voluntary lien is one that you agree to and create by your own action, such as a mortgage.  An involuntary lien is created by law, such as a tax lien, mechanics lien or a judgment lien.

Mortgage Lien – a voluntary lien on real property given to a lender by a borrower as security for payment on money borrowed or loaned. The lender files the mortgage in the office of the county clerk where the property is located. When the debt is fully paid, the lien is removed by the lender filing a Satisfaction of Mortgage.

Judgment Lien – an involuntary lien issued by a court after a judgment is entered against the property owner. It becomes a lien against all property owned by the judgment debtor in that county. A judgment lien is enforced through a sale of the property by the sheriff or marshal, or can be satisfied by paying the judgment. The lien is good for ten years but can be renewed after that time for another ten years.

Tax Lien – an involuntary lien placed on property for failure to pay property taxes or income taxes. Tax liens take priority over other liens and must be paid when you sell your property.  Such liens are not subject to a statute of limitation and remain valid until paid.  If you are purchasing real property, it is important to make sure that all property taxes are paid to date on the property you are buying. If the taxes are not paid, they will become a priority lien on your property.  Most people purchasing real property obtain title insurance.  At the closing, the title closer will not issue a clean title policy to the new owner unless all outstanding taxes have been paid.

Mechanic’s and Materialmen’s Liens – an involuntary lien on real property by a contractor, subcontractor, or supplier/sub-subcontractor for services rendered or materials supplied. The lien attaches to the real property and is used as a guarantee for payment of the lien.

In order to get a mechanic’s lien, a Notice of Lien is filed in the Office of the Clerk of the county where the real property is located. If the property is a residence, the Notice of Lien must be filed within four months after the work is finished or the materials are supplied. For other properties, it must be filed within eight months. The lien attaches to the real property immediately upon being filed with the clerk, and then must be served on the property owner within thirty days. After serving the Notice of Lien on the property owner, the lienor must file an affidavit of service with the county clerk within thirty-five days or the lien will not be valid. The lien is then good for one year, but can be renewed after that.

It is important to meet all legal requirements when going to court to get a mechanic’s or materialmen’s lien. For instance, the Notice of Lien must include:

• The name and residence of the lienor (the contractor, subcontractor, or supplier)
• The name and address of the lienor’s attorney, if any
• The name of the real property owner, against whose interest therein a lien is claimed, and the interest of the owner as far as known to the lienor
• The name of the person who employed the lienor, or to whom materials were given or are to be given. If the lienor is a contractor or subcontractor, it is the name of the person with whom the contract was made
• The labor performed or materials given and the agreed price or value thereof, or materials actually manufactured for but not delivered to the real property and the agreed price or value thereof
• The amount unpaid to the lienor for such labor or materials
• The time when the first and last items of work were performed and materials were provided
• The property subject to the lien, with a sufficient description  for identification; and if in a city or village, its location by street and number, if known

Condo/Co-op Dues and Maintenance/Homeowner Fees liens – liens can also be placed on your property for failure to pay condo or co-op dues or maintenance/homeowners fees.

Legal Editors: Jennifer Polovetsky and Steven Riker, July 2017