Property Liens: What Homeowners Need to Know
Owning a home is a major milestone, but along with this achievement comes the responsibility of managing legal obligations tied to the property. One of the most common legal issues homeowners face is the possibility of property liens. In this article, we’ll explain what liens are, how they can impact homeowners, and how to resolve them if they arise.
If you have further questions in Los Angeles, Woodland Hills, or Orange County, be sure to contact us at the Orantes Law Firm.
What Is a Property Lien?
A property lien is a legal claim placed against a home or real estate, typically as collateral for an unpaid debt. If a homeowner fails to pay debts such as property taxes or home improvement bills, creditors can place a lien on the property. Liens are a way for creditors to secure repayment, meaning they must be settled before the homeowner can sell or refinance the property.
When a lien is placed on your property, it can create a legal complication that prevents you from selling your home or obtaining loans until the debt is resolved. In California, as in many states, liens are public records, which means that any potential buyer or lender will be able to see that there’s an outstanding claim against the property.
Types of Property Liens
Several types of liens can be placed on a property. Each type can affect your homeownership in different ways. Here are the most common:
Tax liens: These are filed by the government when property taxes go unpaid. Tax liens are particularly serious because the government has significant powers to enforce them, including foreclosure. According to the National Tax Lien Association, in 2022, $22 billion in property taxes went unpaid. If a homeowner fails to pay their taxes, the government can place a lien on the home, making it difficult to sell or refinance until the tax debt is settled.
Mechanic’s liens: Contractors or suppliers who provide materials or labor for home improvements can file a mechanic’s lien if they’re not paid. These liens can complicate the sale of the home and must be resolved before any transfer of ownership.
Judgment liens: When a court awards a creditor money from a lawsuit, the creditor can file a judgment lien. This type of lien gives the creditor the right to take proceeds from the sale of the property to satisfy the debt.
How Do Property Liens Affect Homeowners?
Property liens can have serious consequences for homeowners. The most immediate impact is that they can limit your ability to sell or refinance your home. Any lien on the property must be satisfied before ownership can be transferred, which means that the lienholder must be paid before you can receive the proceeds from a sale.
In addition to affecting property transactions, liens can also damage your credit score. For homeowners considering filing for bankruptcy, liens can complicate the process. Some liens, particularly tax liens, can survive bankruptcy and remain attached to the property even after other debts are discharged.
For homeowners in California, understanding the types of liens that may affect their property is critical to protecting their investment. While some liens may be negotiable, such as a contractor's lien, others, like tax liens, require immediate attention to avoid legal consequences such as foreclosure.
Steps to Take If You Have a Property Lien
If you discover a lien has been placed on your property, it’s important not to panic. There are steps you can take to resolve the issue:
Identify the lien: Start by reviewing the lien details. Contact the lienholder to verify the amount owed and the reason for the lien. Understanding who filed the lien and why is the first step in resolving it.
Pay off the debt: The quickest way to remove a lien is to pay off the underlying debt. Once the debt is paid, the lienholder will typically file a release of lien, which will remove the lien from your property records.
Negotiate a settlement: In some cases, particularly with judgment or contractor liens, it may be possible to negotiate a lower amount with the creditor. Many creditors are willing to accept a reduced payment in exchange for settling the debt quickly.
Dispute invalid liens: If you believe the lien was placed in error, you can challenge it in court. For example, if you’ve paid your taxes or completed a payment to a contractor, but a lien is still filed, you may have grounds to dispute it.
File for bankruptcy: If you’re facing multiple liens and large debts, bankruptcy may be an option to resolve the liens. However, keep in mind that not all liens can be removed through bankruptcy. Consulting with an attorney can help you understand how liens may affect your case.
Preventing Liens in the Future
Avoiding property liens requires careful financial management and proactive steps to protect your home. One of the most important things homeowners can do is pay their property taxes on time. Given the severe consequences of tax liens, including potential foreclosure, making timely tax payments should be a priority.
If you find yourself struggling to pay property taxes, contact your local tax authority to explore payment plan options, which may help you avoid a lien being placed on your property.
Another way to prevent liens is by carefully vetting contractors before starting home improvement projects. Hiring reputable, licensed contractors who have the necessary insurance reduces the risk of disputes, which can lead to mechanic’s liens.
Always insist on a written contract that outlines the scope of work and payment terms. This not only helps avoid misunderstandings but also provides protection in case something goes wrong during the project.
Lastly, it’s a good idea to regularly monitor your property records. Periodic checks can help make sure that no liens have been filed against your property without your knowledge. Catching a lien early can give you the chance to address it before it leads to more significant legal or financial consequences.
The Benefits of Working With an Experienced Attorney
If you’re facing a property lien, working with an experienced attorney can be invaluable. Property liens often involve complicated legal processes, and trying to resolve them on your own can lead to further delays and stress.
An attorney who understands property law and the nuances of lien disputes can guide you through the process, helping you understand your rights and obligations. They can work directly with lienholders, negotiate settlements, and even dispute invalid liens in court if necessary.
Additionally, legal professionals can provide strategic advice that is specific to your situation. They can explain how liens may affect a potential bankruptcy filing, and help you understand the different options available to resolve your debts.
Some liens, like tax liens, may not be eliminated through bankruptcy, and an attorney can help you overcome these complications, making sure that you take the right steps to protect your property.
Contact the Orantes Law Firm Today
Property liens can feel overwhelming, but it’s essential to take steps to resolve them quickly and efficiently. If you’re facing a lien on your home or are unsure of how to address a debt issue, contact us for legal advice. Based in California and serving Los Angeles, Woodland Hills, and Orange County, we’re committed to helping you protect your property and your financial future. Reach out to the Orantes Law Firm today to discuss your options.