It is important to know how to put a lien on a property in order to establish some sort of security when someone owes you a debt, a lien will give you right on it a sense of protection on the money you gave on loan.
If you face trouble collecting a debt, even if you had the services of a debt collector agency or attorney, you could place a lien on your debtor’s property to have a guaranty of payment.
This can be time-consuming, but it is a good way to safeguard your money because if the debt is not paid you have the right on the property put on the lien.
There are two types of lien and, therefore in order to know the one you want to implement, you should know both of them.
Mechanic’s lien on a property
- 1 Mechanic’s lien on a property
- 2 Judgment lien
- 3 Steps to put a lien on a property
This is the kind of lien that is usually used when a person is providing some type of service. It is usually known as a “construction lien or laborer lien”.
Also “artisan Lien” because it is made by contractor or construction companies that work on a property and want to protect their investment and payment.
It is also implemented by plumbers, carpenters, and general construction workers.
When a contractor takes on a job and the job is almost completed and the person who contracted him or her it’s refusing to honor the fee, the contractor can put a mechanic’s lien on the property.
The procedure is to bring the bills and proof of the finished job on the county’s court to put the lien if it is approved, the contractor now has the right of possession on the property if the person still denies the payment.
This kind on lien it is similar to a mechanic’s lien, the different if basically that the person who can put the lien it is not a contractor, but to someone who provided another type of service to a creditor and this one does not wants to pay.
The creditor can put a lien on a property for the cost of the service with the state or country, the court will decide the legitimacy and if it’s granted, the creditor will have a right on the property.
It is important to take into consideration that the law it’s different in every state and county and before a person files for lien has to check the details with an attorney or a court clerk.
Steps to put a lien on a property
Give preliminary notice
Before filing a lien it is important to give notice to the debtor. If the payment it’s not made in an established deadline you will have to file a lien on their property.
This notice should be made the first weeks of work, ahead of the payment becoming a problem, this will give you the right to file the lien.
To check the correct procedures, consult with a lawyer or a court clerk because the laws are different in each state. Regularly, in most states, the notice has to be made 1o up to 20 days after the work has begun.
Consult the deadline to file the lien
As you have read before, the state’s laws can vary therefore you should check the deadline for file the lien.
In some states, the deadline can be very short. For example, only 60 days after you finish the job and haven’t received payment, but in others, you will have up to a year.
That’s why it is important to know so you will have a better comprehension on how much time you will have to gather the paperwork to file the lien or even to negotiate other compensation methods with your client.
Make inquiries on the property
To be able to file a lien on a property there is some information that you should know, that’s why you have to do research on the title of the property, so you can ensure that in fact your client does own in full the property and has the legal deed of it. Take in the regard that this process can cost money.
Another thing to consider is that the property can already have a lien and in some states this has prevalence, therefore you should always consult the state law and an attorney.
Sketch your lien
To make a draft of your lien, you have to write a document with the creditor information, the debtor and also the property you want to put the lien on. Some courts have already a form that you can fill out.
The data on the parts should include
- Full names (both of the parties)
- The amount of money of the debt
- A description of the work or the services performed
- The location and information of the property to put the lien on as appear on the deed
Make sure that all the information you put on the document it’s correct, so it will be accepted on the court. To do so, seek guidance from the court clerk.
Also, keep in mind the correct manner to write the document, some states are very strict on this issue and have:
- Margin norms
- Paper size standards
- A specific font on the text
In some states, it is necessary to include an affidavit, to learn how to do it, check this guide here.
File the lien
After you write the document go to your state court to learn which office it’s in charge to receive liens.
In case of filling the lien on a real property make sure you have the correct office, usually, it has to be located on the county where the property is.
Be prepared to pay a fee between $25 up to $50 depending on the location.
The lien can be mailed or delivered in person. Delivering it on person has the advantage of correct it right away if it has mistakes.
Wait for the debt to be settled
Even though the lien does not guarantee the debtor’s payment, it can encourage it or wait until the person sells the property.
And if the buyer wants a clear title on the property, he or she will have to make sure that the debtor satisfies the debt.
If the debt is settled, you will have to inform the court with a form so the lien is lifted.
Seek some other options
If the debt is still not paid, you will have to look for some other options to reach a settlement. The first thing is to consult with an attorney to wage garnishments or bank levies.
Co-founder of AllAboutCareers, one of the top sites for graduates, students and school leavers websites. I studied at the University of Essex. This is my site I talk about finance and help with administrative processes in the USA.