A property lien is a legal document that permits a creditor to take possession of a debtor’s tract of land or real estate property in the event that they are unable to make payments towards their loan debt.
When the debtor defaults, the lien will attach to the property to serve as a notice to others that the property owner owes money to a creditor. A lien is also used to ensure that the property owner will eventually repay any debts owed, or else they will have to give up their land as payment.
Liens can be created either by law or through a contract. The two most common examples of when a lien is used are during mortgage forfeitures and in connection with construction projects.
It is important to note that the laws regulating liens may vary according to the laws of the particular state and also based on the type of loan or property in question.
Lastly, when a lien gets attached to a plot of land, the title to the property is said to be “encumbered” by the lien (also known as “burden”). Basically, what this means is that it will be very difficult to sell or purchase the property due to the debt payments still owed on it, as well as the prospect of future legal action because of the lien.
What is a Property Lien Waiver?
A lien waiver is an agreement made between the debtor and the creditor, which essentially states that the creditor promises not to impose a lien on the debtor’s property in order to obtain payments.
Once the waiver is signed, the creditor relinquishes or forfeits the right to impose a lien on the property. Instead, the creditor will only be permitted to collect payments through the debtor’s credit, bank accounts, or other properties, so long as it is not the property listed in the waiver.
There are several different types of lien waivers, including:
- Conditional Waivers on Progress Payment: This kind of waiver operates as effective proof against any lien placed on the property. However, it only works if the creditor (claimant) has been paid to date and on a timely basis by the creditor.
- Unconditional Payment on Progress Payment: Unconditional payment waivers release all of the creditor’s rights to attach a lien to the property, but only through a specific date.
- Conditional Waiver on Final Payment: This type of waiver releases all claimant rights to file a lien if the debtor has paid on time and is up to date with their payments.
When is a Property Lien Waiver Used?
The use of lien waivers can be a beneficial option for both parties since it can encourage a more open form of exchange between them. The waiver is usually signed before the loan is issued, or in other instances, prior to the construction being performed on a home or building.
In order to enforce a lien waiver, it is crucial that the agreement be in writing and is signed by the party who has the authority to file for a lien (usually a creditor).
Additionally, the waiver should also provide sufficient and detailed descriptions of the property in question, so that in the event of a dispute, the property can be clearly identified.
The reason the property needs to be clearly identified is so that a lien cannot be issued against that particular property; it removes the property from the creditor’s reach. However, the debtor may still have to forfeit other pieces of their property unless those are also specifically mentioned in the lien waiver.
What is a Property Lien Release?
A lien release is another type of legal document that essentially states that the debtor has paid off either all or a substantial portion of their debts and thus is no longer subject to a property lien. Unlike a waiver, however, lien releases are typically entered into after a loan has been issued, or alternatively, after the construction on a home or building has been completed.
The purpose of a lien release is to notify the public that the property owner has officially satisfied their debts and as such, the property is no longer encumbered by a lien. In other words, a lien release has the effect of removing the lien from the landowner’s property.
The debtor should make sure that their lien release has been confirmed in writing and has been signed. Once this has been established, they should promptly record the lien release by filing it with the proper county records department of where that property is located.
What is the Primary Difference Between a Property Lien Waiver and a Property Lien Release?
A lien waiver is issued before the debtor receives their loan and is meant to ensure that a lien will not be placed on the debtor’s property. In contrast, a lien release is issued after a lien has been attached and confirms that the property owner has taken the necessary steps to have the lien removed.
It is good practice to double check and review that a lien waiver or release is valid because sometimes they are not. These types of documents are frequently subject to clerical errors and fraud. Therefore, they should be drafted and reviewed by an attorney in order to ensure that they are accurate.
Should I Hire a Lawyer for Help with Property Lien Waivers and Releases?
Lien waivers and lien releases are two very important types of legal documents. They serve to protect a debtor from having their property taken away by their creditors. These documents can also be used as evidence in the event that a legal dispute arises in connection with a debtor’s property.
Therefore, it may be in your best interest to work with an experienced mortgage lawyer if you are one of the parties involved with forming an agreement for either a lien waiver or a lien release.
In addition, a local mortgage lawyer can also make sure that the documents are properly recorded in accordance with the laws of your particular state.