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<< Previous   of   Next >>   ADVERTISEMENT   CONTACT THE HERALD Mike Benbow, Business Editor benbow@heraldnet.com   Published: Sunday, November 1, 2009 What you need to know about types of liens By Steve Tytler Question: I want to know what are the rules for putting a lien on a piece of property. Answer: First, let me explain that a lien is a claim that one party has a property as security for a debt or obligation. For example, when you get a mortgage you voluntarily allow the lender to place a lien on your property. If you don’t pay your mortgage as agreed, your property is used to satisfy the mortgage. Since you didn’t provide any specifics, I will answer your question about liens in general terms. Just as any person can file a lawsuit any person can place a lien. However, if it can be proven the person who recorded the lien did so without merit, that person may be sued for slander of title. So what are some of the legitimate ways that a person or company may place a lien on your property? The most common type of involuntary lien is a judgment lien that is the result a court action in which someone has won the right to collect a monetary award from you for damages. If you fail to pay the judgment voluntarily, the prevailing party can place a lien on your real estate. Another type is a construction lien that is recorded to secure payment for materials supplied and/or services rendered in the improvement, repair or maintenance of real property. The legal theory is that since the person has enhanced the value of your property, he or she should be able to assert a claim against it for payment. Anyone who works on your house (subcontractors, laborers, etc.) or supplies the materials can file a construction lien. Mortgages and property taxes also create liens against your property. These are all legally valid liens. But what happens if someone records a lien against your property without a valid legal reason? You still have a problem, because liens create a cloud on your title. For example, let’s say we bet $500 on a football game. You lose the bet but refuse to pay me, saying you were only kidding. I decide that I want to collect anyway. I find out that you’re selling your house, so I place a lien on it to collect my $500. The lien clouds the title to your home and stops your sale. At that point you basically have three choices: Pay me to settle the lien. Sue me for slander of title and attempt to collect damages for the financial loss you suffered in losing your home sale. Go to court for a quiet title action to clear the lien off the title to your home. If I don’t have any money, it won’t do any good to sue me for slander of title. If you need a full court hearing, it may take a year or two to get a court date. In the meantime, you may be able to have the court force me to post a bond to cover your damages and legal costs in case I eventually lose in court. As you can see, liens can cause a lot of headaches, whether they are valid or not. You may be able to get a title insurance company to insure around a lien so that you can sell your home. You would have to show that you are taking action to clear the lien off the title, and sign a hold harmless agreement to indemnify the title company from any liability for that lien. Mail your real estate questions to Steve Tytler, The Herald, P.O. Box, Everett, WA 98206, or e-mail him at economy@heraldnet.com. READER COMMENTS Be the first to comment. You must be a registered user and verify your e-mail address to post comments to blogs or articles on HeraldNet. To register, click here. To read other terms and conditions, click here. Log out

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