Statutory liens are legal claims on property that allow creditors to collect a debt without a court order or property owner’s consent. They vary by region and can be automatic, such as tax liens, or created by certain transactions, such as mechanics’ liens. Liens can only be revoked by settling the debt and can negatively impact credit and the ability to get loans. It’s important to negotiate payment arrangements upfront to avoid triggering a lien.
A statutory lien is a claim on property that is mandated by law or ordinance. You do not need to obtain a court order to obtain a legal lien, nor do you need to obtain the property owner’s consent to enter into a lien against it. Like other liens, statutory liens are designed to allow creditors to collect a debt. The law surrounding such privileges varies by region. Individuals who have been subject to a statutory lien should consult a lawyer to discuss their options.
These types of privileges are created by the very nature of certain types of transactions. For example, people such as construction workers have so-called “mechanics’ pledges,” which allow them to hold onto the property as a loan for consideration. Similarly, tax agencies can enter into a lien against a defaulting taxpayer’s property. These privileges are defined by law and are automatic in nature.
Once a legal lien goes into effect, the only way to revoke the lien is to settle the debt that led a creditor to enforce the lien in the first place. This can be done by paying off the debt in full, working out a payment plan and asking the creditor to reverse the lien, or by having part of the debt forgiven or written off. Lawyers can often help with negotiations to pay off a debt so that a lien is reversed.
The cancellation of the pledge is important. As long as an asset is covered by a legal lien, it cannot be sold or transferred because the title is unclear. The lender may also be able to take further action; tax agencies, for example, can seize assets for non-payment and auction them off to settle a tax debt. Having a lien also reflects badly on someone’s credit and can make it difficult to get loans.
This type of involuntary pledge will not be triggered unless a triggering event occurs, such as non-payment for services rendered. The obligee is usually willing to negotiate first, applying only the liens to which he is legally entitled when it becomes apparent that the obligor will not pay. People who think they will have a hard time paying for services, property taxes, or other expenses should try to work out a payment arrangement upfront, rather than simply not paying and waiting for the lender to take action.
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