A lien is when a creditor places a claim on a property to secure payment for a loan or service provided. The lien holder can sell the property to settle the debt, but must follow legal procedures. Failure to comply can result in an unenforceable lien. Notification requirements apply, and legal requirements must be met before placing a lien.
A lien typically occurs when lenders, creditors, or service providers take action to place a lien on a particular piece of property to secure payment for a loan or for services provided. A borrower or debtor usually agrees to a lien being placed on property that he owns so that he can obtain a loan. A lien arises when a service provider renders services and does not receive payment from the owner for those services. In these cases, a person asserting the claim must take certain legal steps to place a lien on the owner’s property, often a home.
A valid lien claim or security interest on a particular piece of property entitles a person or company to take legal action to compel a party to give up that property through foreclosure proceedings. The law will typically require the lien holder to sell the property to meet the payment of a debt. The lien holder must sell the property in accordance with the law, which usually requires him to conduct an auction or make the sale in a commercially reasonable manner. If the sale of a property generates proceeds in excess of the debt, the lien holder must relinquish the remaining proceeds to the owner of the property.
If a lien holder sells the property and the sale does not generate enough cash to settle the debt, the lien holder can obtain a default judgment against the borrower for the outstanding balance. If the court issues a wrongfulness judgment, the creditor will then have to take action to enforce that wrongfulness judgment against the debtor. If a lien claimant fails to comply with the law in asserting his lien, then a court may declare the lien claim unenforceable.
Many jurisdictions require a company filing a lien claim to provide a lien notice to the property owner. This notifies the owner of the complaint and gives him an opportunity to remedy the situation by making payment. If a company fails to provide notice as required by law, the court will not enforce the lien. The notification requirement usually applies when the lien applicant is a subcontractor and does not have a direct contract with a property owner.
The person making a lien application must meet all legal requirements before placing an actual lien on the property. The law usually specifies what must be included in a lien notice, how it must be served, and when. A pledgee will lose his rights to the value of the pledge if there are defects in the notice of pledge. Therefore, it is imperative that a lien applicant carefully examine the laws of his or her jurisdiction to ensure compliance.
Protect your devices with Threat Protection by NordVPN
