What Are the Different Types of Liens?

Does legal mumbo jumbo go right over your head? You’re not alone. In fact, around 97% of people admit to agreeing to various terms and conditions without reading them, due to the overly complex language.

However, sometimes, you need to have a better understanding of a legal term. In that case, it helps to have a simple, easy-to-understand guide at your fingertips. When it comes to understanding the different types of liens, that’s exactly what this article is.

Read on to learn about different lien examples so you have a better understanding of what they all mean.

Tax Liens

One of the most common types of liens is a tax lien. In the simplest terms, any lien is a form of interest on an item to secure payment or any other type of obligation.

So, property liens apply for unpaid property taxes. Let’s say, for example, a homeowner doesn’t pay property taxes on their residence. The city or town in which they live can file a property tax lien. If the homeowner still doesn’t pay, then they can force a foreclosure on the property.

There are also IRS tax liens that the government can file if you fail to pay your income taxes on time. In this case, the government would file a lien on property you own, getting a legal right to it if you continue not to pay your income taxes.

Construction or Mechanic’s Liens

If you hire a contractor to do work on your home, they can also file a lien against you. If you don’t pay for the work they complete, they can file a lien on the property, as a method to help them get the payment they deserve. These types of liens in real estate can then cause problems down the road.

Even if you haven’t personally had a lien placed on your property, you can still be affected by one. Let’s say that a contractor put a mechanic’s lien on a home after working on a roofing project for which the homeowner didn’t pay. If the homeowner then puts the home on the market and you try to buy it, your real estate agent should do a search that shows any outstanding liens.

If the homeowner doesn’t take care of it, then you may not be able to complete the purchase. In some cases, liens can be waived, depending on the circumstances. Read this lien waiver guide for more information.

Judgment Liens

If you owe a creditor money and don’t pay them, the creditor can sue you for nonpayment. From there, if the creditor wins a money judgment in court, they can file a judgment lien on your property, using the money judgment as proof that they are entitled to the lien.

As a result, you won’t be able to sell your home without taking care of the outstanding debts you owe.

Understanding the Different Types of Liens

After reading this short guide to the different types of liens, we hope you have a better understanding of how they differ.

Looking for more easy-to-understand content like this? Browse through our full collection of articles before you go!

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