A notice of lien allows a creditor to have a legal interest in an asset until a debt is paid. There are different types of lien notices, including tax liens, weed liens, and mechanical liens. A perfected lien gives preference to a creditor over others.
A notice of lien is a document stating that one party, who owns some sort of asset, promises to pay off a debt to another party by allowing the other party to have a legal interest in the asset. For example, if a homeowner owes a debt to another party, the second party may issue a notice of lien on the ownership of the home stating that until the debt is paid, the homeowner may not sell or otherwise have the property. A common form of lien is a home loan between a homeowner and a bank. There are different types of lien notices that are used for different purposes.
One type of lien notice is made by law. This type of notice obliges the owner of the asset, or the lessor, to enter into the contract with the person to whom he owes the debt, called the assignee. Other types of lien notices are consensual, which means that the debtor volunteers to place his property or security in the temporary possession of the beneficiary until the debt is paid.
In some lien cases, the lender takes effective possession of the property. In other cases, the property is held by the debtor until the debt is sold or paid. Special liens apply only to the property in question, while general liens oblige the obligee to make all payments owed to the obligee.
There are several specific types of lien notices, including those used in legal and commercial fields. A tax lien notice states that the debtor will pay some sort of tax, while weed liens are imposed by the government to prevent a debtor’s unattended property from becoming a public hazard. A mechanical lien protects those who do work on an asset and guarantees payment for this work. A judgment lien notice is used against an individual who has lost a court case and has financial responsibility for the judgment. Admiralty law even has a maritime lien that applies to seagoing vessels.
A perfected lien gives preference to a creditor over others who might try to bring claims against the debtor. To obtain a completed lien notice, a creditor usually must follow the law and notify other creditors of his intent. If an asset is owned by the lender, as in the case of a home mortgage, the lien is presumed completed. If the debtor still has the property or collateral, a creditor may need to present a security document.
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