Someone Placed a Lien on the Deed. Did They Follow the Rules?

Various entities can make claims for unpaid debts by recording liens on a title. Mortgage liens are voluntary — you opt in. Other kinds of liens are imposed on the title by a court, a homeowner’s association, a tax department, etc.

A lien clouds a title, impacting the deed’s marketability. It sticks to the title until someone clears it up. A lien can lead to foreclosure for a homeowner who fails to act.

But the party who records the lien, too, has rules to follow. Let’s take a look at these rules as they commonly apply.

The Mechanic’s (Contractor’s) Lien

A mechanic’s lien gives contractors and construction companies leverage over a deed holder who owes them for work and/or materials. Liens can apply for big jobs or small — even minor work like a driveway repair. 

It’s a common practice in many states for customers to avoid claims on their deeds by using a lien waiver (where allowed by law). Otherwise, refusing to pay bills because of a disagreement could lead to a lien.

If there is a disagreement that the parties can’t easily resolve, the deed holder should speak with a lawyer experienced in contract and construction disputes. One of the first things a hired attorney will do is verify that a lien is valid. Was it timely filed in the home’s county? Did the contractors follow the county rules and deadlines?

What the Rules Say

There are requirements for notification, formatting, filing, and (eventually) removal:

• Following the applicable timeline, the contractor must send a notice of lien when intending to make a filing. To use Wisconsin as an example, 30+ days in advance, contractors must give preliminary notice that they may exercise lien rights on owner’s title for nonpayment.

• The state statute lays out the timeline for the lien to be filed — for example, six months after the last date the contractor worked at or delivered materials to the property.

• The creditor or their lawyer must sign the lien claim.

• Notice must be served on the owner, briefly describing the nature of the claim, its amount, and the relevant land and work. The notice in Wisconsin, for example, must refer to a specific contract or demand; the amount owed; the debtor’s name; a legal description of the property on which the lien is recorded; and other material facts, including subcontractor claims.

• The lien claim is filed along with a copy of the initial notice at the county courthouse, usually for a small fee.

• Within 30 days after recording (again, with Wisconsin law as the example), a contractor must serve a copy of the filed claim on the deed holder.

• If enforcing a lien in court, the contractor must act within the state’s deadline (such as a six-month window) from the date when personnel or materials were last brought to the property.

• After the debtor pays, the contractor is responsible for recording the lien release form. The contractor gets the deed holder to sign off on the release, and then must file the release with the county recorder’s office.

To enforce their rights, creditors must sue to foreclose their liens within a certain time from the date it was recorded. A lien will expire in one or two years, depending on the state. But even expired liens cause issues, especially when it’s time to sell.

Check out this primer on mechanics’ liens from Deeds.com.

Other Parties Who File Lien Claims

A number of parties may be able to record a lien against real estate. Common examples are:

• The homeowners’ association. If the condo or house is part of a homeowners’ association, an action of the board can result in a lien. Look out for “lienable fines” if you break a common rule or fall behind on your monthly HOA assessments. State condo law and the association’s bylaws set forth notice and timing rules, and the HOA must follow them in order to record a valid lien.

• Your local government. A municipal lien search can uncover utility liens, zoning fines, or other local issues that might or might not have been recorded with the county.

• The tax collectors. A federal tax lien is the result of falling behind in taxes owed to the IRS. Local governments, too, can recover unpaid taxes by recording, then foreclosing on, liens. Back taxes, if not resolved, may mean the deed holder (and the mortgage lender) loses the home. Before recording the lien, the tax agency will send a demand for payment. A lien comes into play if the notice goes ignored.

• The courts. Got unpaid bills or dues? In some cases, creditors could go to court and seek a judgment lien to place a claim on your deed in order to get their funds.

• Real estate brokerages. These businesses can file claims for brokers’ liens to recoup unpaid fees.

Please know that states create lien laws. State law is the place to begin due diligence when looking for lien rules. 

Can new owners be caught unaware by liens filed before they took title? It’s possible. When acquiring a deed, buying an enhanced title insurance policy may address liens recorded both before and after the policy’s effective date. Speak with a title insurer to learn more.

The Process of Removing a Lien

First, know what liens exist. Searching the title is one part of this. A municipal lien search is an additional form of diligence. To find unresolved claims, check with the tax department and local building and utility offices. Look for any balances including fees, penalties, and interest.  

A lien should be removed when the deed holder is able to resolve it. Leaving a lien on a title can complicate selling or refinancing. Once the deed holder pays the creditor the agreed-upon amount to resolve the lien, the creditor needs to sign and record a lien release, as outlined in the section above.

Mortgage balances may still exist when a deed holder goes to sell the home. Many sellers use their sale proceeds to pay off their balances. A mortgage company can supply the deed holder with a recordable lien release after mortgage repayment. Speak with your real estate attorney or agent about successfully selling, while paying off the lienholder.

For old or inappropriate liens, the deed holder should contact the lien holder to ask for the lien to be removed. If the debt is disputed, it is often cheapest to work out a settlement to avoid court.

Recording a lien release acts as an official notice of the lien removal.  

A Simple Way to Help Avoid Surprises

Many counties offer email alerts for free when a claim is recorded against a deed holder’s address. It’s an excellent idea to go to the county deed recorder’s website and sign up for these alerts. Residents may sign up on their county deed recorder’s website 24/7. Then, anyone subscribed to the service gets a notification when a claim (typically, that’s a document that contains your property description) is filed on your property. To see an example, here is the notification service for Camden County, New Jersey.

If you have case-specific questions about liens, consult a local attorney with real estate knowledge. Deeds.com does not provide financial or legal advice.