What Does a Lien Release Mean?

A lien represents a claim a party or person makes on a piece of property owned by another person or entity. A lien release involves the party that placed the lien, known as the lien holder, releasing the lien and giving up any claim on the piece of property the lien had been tied to.

Types of Liens

State laws enable lien holders to place liens with or without the property owner's consent on a variety of different things. Liens on homes and vehicles are among the most commonly placed types of liens. Liens are usually placed by creditors seeking to obtain payment for debts. When people take out mortgages or car loans, they agree for the lien holder to place a lien on the car or home in exchange for borrowing the money needed to buy it. However, creditors can also file court motions to have liens placed on property against the owner's wishes to settle unpaid unsecured debts such as credit cards.

Placing and Removing Liens

Liens on homes, land and commercial property are recorded at the county courthouse. One piece of property can have several liens on it and in some instances the total amount of the liens exceeds the value of the property. The lien holders claims on the property are prioritized based on seniority. The property owner must satisfy the oldest lien first and the newest lien last. The owner must make up the shortfall if the property sale does not raise sufficient funds to satisfy all of the liens. Each lien holder must file a satisfaction of lien notice at the county court house. Liens on vehicles are recorded and removed at the department of motor vehicles.

Partial Release of Lien

In some situations property owners request lien holders to file a partial release of lien notice at the county courthouse. Lien holders who file partial release of lien notices do not give up a claim on the property. Partial releases involve reducing the amount of the lien. Building contractors often file partial lien releases as land owners and developers make payments incrementally during the building of a home. The lien holder only files a satisfaction of liens after the last payment has been received.

Lien Complications

When you finance the purchase of a home, the lender requires you to buy title insurance. Title insurance protects home owners and lenders from losses arising from title problems, including liens on property. During a home sale, the seller has to pay off any existing mortgages, but other liens such as liens placed by the Inland Revenue Service for back taxes sometimes get overlooked. Generally, liens are detected prior to a home sale but, occasionally, liens are misfiled and only come to light after a home has been sold. The title insurance company insures the borrower and lender for any costs arising from the release of the lien.

References

• Oregon State Bar: Liens
• Federal Deposit Insurance Corporation: Obtaining a Lien Release
• Bankrate: Refinancing With a Tax Lien
• State of California: Partial Release of Lien and Subordination of Lien
• National Public Radio: Not So Neighborly Associations Foreclosing On Homes
• Bankrate: Six Questions to Ask About Title Insurance

Resources

• Bankrate: IRS Tax Liens on Homes