A lien is a legal claim on a property that gives a third party a security interest in the asset until the debt is paid in full. The most common type of lien on a vehicle title is placed by lending institution that financed the purchase, but liens also may be placed by third parties that are owed money for a mechanic’s services or for storage of the vehicle. Any lien must be paid in full to be vacated before a vehicle can be sold to a private party, but the release process differs between the two types of lien holders.
The Lender as Lien Holder
When the purchase of a vehicle is financed, the lender usually becomes a lien holder on the certificate of title. This lien protects the lender against a private sale prior to the payoff of the loan. The lender will be identified on the title by name and address, and will be recorded with the DMV of the vehicle owner’s state of residence. Most lenders will retain the title until the loan is paid in full, but there are some that will allow the owner of the vehicle to hold the title.
Removing a Lender’s Lien
Once the principle and interest on the loan have been paid in full, the lender will send the lien release forms and the signed title to the owner of the vehicle. The vehicle owner usually receives these forms within 30 days of the last payment on the loan. If the lien release isn’t received during that time, the vehicle owner should contact the lender and request that the DMV form, MV-901, be completed to confirm that all obligations of the loan have been met.
A second option is to request a letter written by the lender to release the lien, but the confirmation process of the letter’s legitimacy by the DMV can slow the release of the title. Take the paperwork to the DMV to have the lien holder removed from the title.
Mechanic’s and Storage Liens
Mechanic’s liens usually are placed on a title when the owner of the vehicle cannot pay for work that has been performed on the car. Storage liens are common on vehicles that have been impounded after being towed. If the vehicle isn’t paid for and picked up by the owner, a storage lien can be placed on the vehicle after a designated period of time set by state laws. With both mechanic’s and storage liens, the state will set a period of time after which the vehicle can be sold at auction to recover funds due by the lien holder.
Removing Mechanic’s and Storage Liens
While all releases require the balance owed to be paid in full, the release of these types of liens is governed by the laws of each state. In California, for example, after the vehicle owner pays the debt, the lien holder will complete the state’s “Unconditional Waiver and Release upon Final Payment.” This form can then be presented to the DMV to have the lien holder removed from the title. Florida uses a different process, which requires the vehicle owner to post a bond for the full payoff amount to the county or district clerk, which then transfers the money to the lien holder. To ensure a clean transaction, contact the DMV in your state to learn the specific steps required to remove these types of liens.
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