Mechanics liens are designed to make sure that a creditor is able to get paid for the work that they have done. Essentially, a lien is a type of restriction, which means that if a property is sold, the lien owner will automatically get paid. There are some very stringent rules involving mechanic liens and you must also be aware of the fact that different states have different regulations.
What Liens Are – And What They Are Not
Liens can be placed by contractors for construction supplies, labor services, tax debt and mortgages. When it comes to construction supplies and labor services, the lien can only be placed on the property on which work was actually done. Hence, someone who performed work on a rental property cannot then place a lien on another property the tenant may own.
The Mortgage
A mortgage is by far the most common lien type. Essentially, when you purchase your home, your mortgage company places a lien against the property you have purchased with their money. Hence, if you sell your property, you will have to use that money to pay off your mortgage. In almost all cases, the mortgage is also the senior lien, meaning it will take precedence over any other lien on the property.
The Mechanics Lien
Mechanics liens are also very common types of liens. Essentially, when someone works on a property but does not receive payment, they can place a lien on it. In some cases, particularly if the work is extensive, the lien will be placed before the work is done. Many people do not realize there is a mechanics lien on their property. If this happens to you, it is likely that you hired a builder who did not actually pay their subcontractors, and they will have placed the lien on your property, but it will have been sent to the builder. This is a serious issue, but not an unresolvable one.
Tax Liens
Then, there is the tax liens. This can be placed for non-payment of taxes, be they income or property taxes. This is one of the things that set them apart from other types of liens, mainly that they can be placed on a property even if that the non-payment has nothing to do with the property. The other thing that sets this lien apart is that it often takes precedence over any other type of lien, with exception of the mortgage. For other liens, the lien that was filed first will also be paid first.
The final difference is that an income tax lien against your property can be against any and all property. With a mechanics lien, for instance, the contractor can only force a property owner to sell the home itself. With an income tax lien, however, the IRS can force the property owner to sell not just their home, but also all their other assets contained within the home, including furniture, vehicles, art work and more.
