The number of things you need to know about homeownership can almost be overwhelming, but DomiDocs is here to provide you with real information you can use, including providing education on liens and lien fraud. Why do you need to know about liens? Because property fraud is one of the fastest growing crime in America, and unfortunately, fraud may have already occurred and you may not even know it. Let’s look at lien education and lien fraud 101, and how HomeLock™ provides the best solution.
What is a lien?
A lien is a claim made on a property to satisfy a debt. Liens are often applied to real estate, although an entity may place a lien on any property to which a debt or obligation is owed. A lien often results when the owner of the property loses a lawsuit, and it compels the owner to meet its terms or risk losing the property.
Who can establish a lien against your property?
When a person or an entity files a legal claim against your property, this is known as a lien. It basically means you didn’t pay what was owed and they’re now taking possession of the asset you put forward as collateral. A lien can be filed by the IRS, a creditor, or as the result of a legal judgment in court. See the many types of liens below.
Has a lien been placed on your property without your knowledge?
While ignorance can be bliss in some situations, don’t be caught off guard when it comes to lien education as it can happen to any homeowner. Scammers can and will target your home through any number of scenarios:
- fraudsters took out Small Business Administration (SBA) disaster relief loans for supposed farmers in Florida, who have never owned farms, nor have filed for disaster assistance. But the actual homeowners whose identities were stolen are now on the financial hook until the matter is resolved in court
- a homeowner in Canada agreed to a fixed-price with a contractor to build their home. They paid $90,000 for the work completed to date and were slapped with a false lien of $102,000. The house construction is now in limbo, the case is still in the court system, and the homeowner has shelled out nearly $70,000 in legal fees so far
- a now-defunct Florida pool company never completed building pools for over 100 homeowners, and they also never paid their subcontractors. Homeowners were horrified to be served liens against their homes since the pool company didn’t pay their bills, making the homeowners now liable
Lien education tip: don’t ignore possible signs of your property being compromised. While your initial response may be that you don’t owe anyone a dime, if you’re receiving overdue notices in the mail, don’t ignore them. This could signal fraud or a lien that’s been placed on your home without your knowledge.
Lien education and fraud 101: Types of liens
When it comes to liens on properties, there’s no shortage of types. Here are some of the most common liens that can apply to homeownership:
- Child support lien: if you don’t pay the child support or alimony you owe, a child support lien can be involuntarily placed on your property forcing you to sell to pay off the debt.
- Contractual lien: a contractual lien is a legal claim against a property that was voluntarily provided as with a mortgage; if you don’t pay, the bank has the right to take your home and recoup its money.
- Family law real property lien: in California, a spouse can file a lien on a mutual real estate asset to secure payment of lawyer fees.
- First lien: if a borrower defaults and property was used as collateral for that debt, a first lien is paid back before any other liens, such as with a federal tax lien; a first lien takes priority over all other liens.
- HOA or COA lien: homeowner associations (HOA) and condominium owner’s associations (COA) have the power to obtain a lien on your property if you neglect to pay the monthly HOA fees or don’t comply with their requirements; this also applies to a property owner’s association or POA.
- Judgment lien: if a homeowner faces a scenario where they’ve been sued, loses, and can’t pay the settlement, a judge will order a lien against their property; likely scenarios here include lawsuits from vehicle accidents and/or small claims court rulings. Judgment liens can also be applied to future acquisitions if the homeowner isn’t able to pay upfront.
- Mechanics lien: if there are contractors or real estate developers who haven’t been paid for their time or materials, a mechanics lien can be placed on your home.
- Mortgage lien: as your mortgage lender has a stake in your home, if you don’t keep up with the payments, a mortgage lien can be placed forcing you to pay up or risk losing your property through foreclosure. A first mortgage is also considered to be a primary lien.
- Municipal lien: this type of lien could be placed on your property for unpaid utility bills, code violations, expired permits, and/or other municipal debts/regulations not satisfied.
- Property Tax lien: is a legal claim filed against a property resulting from unpaid property taxes; this prohibits a property from being refinanced or sold until the lien is settled.
- Super lien: while they vary from state to state, a super lien generally includes the spectrum of property tax liens, mechanics liens, and/or any claims filed against a homeowner by an environmental protection agency such as in Connecticut or Massachusetts.
- Tax lien: is a legal claim filed by the government or Internal Revenue Service (IRS) against your property and assets when you don’t pay your taxes as required; this could occur on a federal, local, or state level, with the federal IRS taking priority over all other possible liens.
- Voluntary lien: is a lien where the property owner voluntarily grants a legal claim to the property to another party as a guarantee for debt repayment.
How do I remove a lien?
Generally, a lien will stay in place until your creditor has been repaid in full and subsequently releases or negates the lien. You may need to request a Release of Lien form which serves as proof that your debt has been paid off. Negotiating with creditors is another way of removing a property lien, or by taking legal action through the courts with the lien holder to enforce removal.
Will a lien affect my credit score?
Judgment and mechanic liens can remain on your credit report for up to seven years. A federal IRS lien won’t show up on your credit report, however, lien information is still available publicly so a potential lender could still pass judgment at their discretion as to your credit score.
Immediate detection is the best defense
As with any scenario in life, it’s always better to be proactive than reactive, don’t you think? It’s no different when it comes to lien education: the more you know, the better you’ll be able to deal with the situation at hand. HomeLock™ monitors 200+ data points including 80+ different types of lien filings so if there’s any lien activity on a property, you’ll be instantly notified of any changes.
Lien education is the first step in knowing how to protect your home from lien fraud, a very real problem across America. The second step is to use real technology to provide real protection for you and your family. HomeLock™ has got you covered before, during, and after a fraudulent activity takes place. Plus, HomeLock™ features fraud resolution services including:
- $25,000 in legal services for fraud defense
- $1 million in coverage through a Cyber Insurance Policy
- our dedicated HomeLock™ Fraud Protection team will assist you with up to 2 hours of resolution services annually including research on alerts found, resolution information for various sites, and in-house attorney fees
And remember, HomeLock™ comes complete with our award-winning home management platform so you can spend less time organizing and worrying, and more time with the people and things you love.
Be sure to read our HomeLock™ FAQs and then sign up to protect yourself today!
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Whether we’re providing educational resources on land/lot/parcel fraud or how to weather natural disasters, DomiDocs® is committed to simplifying home management by offering functional tools designed to help save you both time and money, including streamlined document organization, real-time market value tracking, and more!
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