- Liens should be avoided as much as possible because they restrict your ability to sell your home, or obtain a home-equity loan or mortgage. They also have the potential to lead to a foreclosure of your home in certain instances. When somebody, like a creditor, takes a lien on your home and files a lien document with the county recorder, that person gains a legal interest in your home.
- There are many types of liens, but the most common are mechanic's liens, judgment liens and tax liens. Once a house is built, a general contractor files a lien on the property until they get paid for their work. This is called a mechanic's lien. Subcontractors and other people who work on your home, including home repairmen, also file mechanic's liens if they don't get paid for the work they do on your home. A judgment lien arises when somebody wins a lawsuit against you, meaning they obtain a judgment against you. That person, called a judgment creditor, can file a lien on your home in order to collect any moneys awarded as a result of the judgment against you. Finally, the IRS and other taxing entities, such as states and counties, can file a tax lien on your home if you don't pay your income tax, property tax or other taxes.
- Liens subject your property to potential legal liability, since the person who filed the lien is claiming a legal interest in your home. Because nobody knows for sure whether you in fact own your home, or whether it will be foreclosed on to pay off the lien, it will be nearly impossible to sell your home or to use your home as security on a loan.
- There are two ways to have a lien on your home removed. First, you can negotiate with the lien holder (the person who filed the lien) and see if you can get them to voluntarily remove it. For example, you might pay your general contractor and in exchange the contractor agrees to remove the lien. The second way to remove a lien is to file a lawsuit and obtain a judgment from the court ordering its removal. If a lien has been wrongly recorded against your home, you can probably recover damages from the person who filed that lien.
- The easiest way to prevent liens on your home is pay on time anybody who performs construction work for you, and to pay your taxes on time. If you lose a lawsuit, pay the amount you are ordered to pay. As long as you pay all your creditors and taxes on time, you won't be in danger of losing your home to a lien. Failure to pay any of these, or delays in paying them, will put your house at risk.
