What Happens When A Lien Expires

For mortgages, when the lien expires, the mortgage is considered to be paid in full, and the lienholder should release the lien on the home or other property. This will usually happen after the homeowner pays off the mortgage. Additional steps may be necessary if the lien holder does not immediately release the lien.

For other liens, such as mechanics’ liens or tax liens, the expiration of the lien typically means that the lienholder can no longer seek payment from the property, but they may retain the right to pursue the debt in other ways. In some cases, the lien may need to be removed from the public record if it can no longer be enforced.

Regardless of the type of lien, those with expired or “dead” liens should work to ensure the lien is released quickly and correctly. This can help them protect their credit rating and ensure that the debt has been resolved.

How a Lien is Created

A lien is created when a creditor establishes a claim against a debtor’s property as security for a debt. Lienholders can be public entities, such as a local government, or private entities, such as a bank or a private lender. To create a lien, the lienholder must typically file paperwork with the appropriate state agency, such as the county recorder or the secretary of state. After the lien is filed, the lienholder will generally have a right to seize the property if the debt is not paid in full.

Types of Liens

There are several types of liens. Mortgage liens are created when a borrower takes out a loan to purchase property, and the lender places a lien on the home or property as collateral for the debt. Mechanics’ liens are made against a property when the homeowner engages a contractor for home repairs or improvements and the contractor isn’t paid for the work. Tax liens may come from a local, state, or federal agency and give the government the right to seize a taxpayer’s property if taxes are not paid on time. Finally, judgment liens are created when a creditor or party awarded damages in a lawsuit is not paid and files a lien on the debtor’s property as a way of securing payment.

How a Lien is Enforced

A lienholder can enforce a lien on a debtor’s property by seizing and selling the property as a means of recovering the debt. This is usually done through a court-ordered auction, where the proceeds of the sale are used to pay off the debt. The lien must be recorded ahead of time to claim a priority position and to prevent other creditors from claiming the proceeds of the sale. If there is more debt than what the proceeds of the sale can cover, the lienholder typically has the right to collect the remaining amount from the debtor.

Implications for Homeowners when a Mortgage Lien Expires

When a mortgage lien expires, the mortgage is considered to be paid in full and the lienholder should release the lien on the property. Homeowners should ensure that the lien is released quickly and correctly in order to protect their credit rating and ensure that the debt has been fully resolved. If the lien holder does not immediately release the lien, additional steps may be necessary to properly close the account.

Implications for Other Parties When a Lien Expires

When a lien expires, it no longer can be enforced by the lienholder. Depending on the type of lien, the expiration can mean that the lienholder can no longer seek payment from the property, but they may retain the right to pursue the debt in other ways. The lien may need to be removed from the public record in some cases to prevent other creditors from claiming the proceeds of the sale. Homeowners and other parties should work to ensure that the lien is released quickly and correctly to protect their credit rating and ensure that the debt has been fully resolved.