Here's What Happens When Someone Puts a Lien on Your House

A lien is a legal tool used by those you owe money to and ensures you'll repay them -- sooner or later. Here, we look at how liens work, who can place a lien on your property, and what you can do if a lien is placed. 

What is a lien?

A lien is a legal claim against your property, and amounts to a guarantee that you can't sell it without repaying the outstanding debt. Interestingly, liens can be placed against other possessions too. For example, a creditor might put a lien on a vehicle or furniture you're still paying for. However, here we'll focus on liens placed on homes. 

Putting a lien on your property is not a matter of simply claiming you owe them money. Creditors are required to go through court, and a judge must approve the lien.

Let's say you're in dispute with a contractor who remodeled your home, and you still owe $5,000 for the job. It's been months, and you still don't believe you should pay. If the contractor takes the case to court and a judge signs a record of a lien, the only way to remove it is to pay the contractor $5,000. 

How long will the lien last?

A lien remains in effect for seven years even if a creditor does not force a sale. It may be impossible to sell the property during that time because the buyer will want the judgment paid in full before agreeing to buy. 

You may not be off the hook when the seven years run out. A creditor has the right to renew it twice, meaning a lien can last up to 21 years.

If a lien is successfully placed on your home and you don't work out arrangements to pay the past debt, creditors can sell your home and collect the debt. However, it's exceptionally uncommon for a creditor to go to the trouble of selling your home due to the associated costs. Simply put, it costs them more money and hassle than it's worth. 

Who can place a lien?

Only select parties can place a lien on your home. For example, if you're on vacation with friends and forget to pay a buddy back for your hotel room, that person cannot place a lien. 

According to Legal Shield, these six parties can place a lien. 

1. Internal Revenue Service (IRS)

Failure to pay back taxes gives the IRS a right to put a lien on everything you own, including your home. 

2. Local government

The government can place a lien if you don't pay property taxes. Further, if you ignore your tax bill, the government can sell your home to get its money. 

One thing that could happen (but don't count on this) is that your mortgage lender protects its investment by paying the taxes and adding that amount to your total mortgage debt. 

3. Contractors

Remember that contractor we mentioned? Failure to pay means a contractor can file a mechanic's lien. Most states require the contractor to file the lien within six months of non-payment and to sue to enforce the lien within 12 months. While state laws vary, It's important to know that failure to pay a contractor can lead to a massive headache. 

4. Attorneys

A lawyer can place a lien on your home if you have any outstanding legal fees. Most -- but not all -- attorney contracts include this stipulation. 

5. Former spouse or partner

If you owe substantial child support or alimony, be aware that your ex can place a lien on your property. 

6. Creditors

While it's not as common, holders of unsecured debt, like medical bills, personal loans, and credit cards, can sue and get a financial judgment against you for unpaid debt. Once they have that judgment, they can return to the court and request a lien. 

Removing a lien

Liens on your property can be removed in several ways, including:

• Pay the lien holder back
• Negotiate a payment plan or partial payment in exchange for a lien release
• If the lien is invalid, go to court and ask for it to be removed. 

Naturally, your best bet is to avoid a lien in the first place. However, keep working on a solution if a lien is ever placed on your property. There are ways to get out from under it.