Tax Liens: The Lowdown On Tax Liens

 

 

 

What are tax liens? In its most basic form, a tax lien is a way to legally guarantee that an individual, business or lender will be paid for a debt, by placing a restriction on the debtor's property, which limits them from transferring its title or using it as collateral to obtain further financing.

Tax Liens may be placed on a type of personal property of real estate. The most common lien today is a mortgage. Other types include: mechanic's liens; attorney's liens and tax liens. Each type sports its own rules and deadlines regarding filing, and may vary widely from state to state or even county to county.

There are two types of liens: the particular lien; and the general lien.

Particular liens arise when a person claims a right to retain property, in respect of money or labor expended on the property in question. This kind of lien may be issued in one of three ways: by express contract; from implied contract as in usage of trade); or by legal arrangement of the two parties (as when a contractor finishes contracted work on the property or goods have been salvaged from the sea).

In contrast, general liens are issued when: an agreement is reached between the two parties; by general usage or trade; or by particular usage or trade.

In addition, most liens are also divided into two main groups: legal and federal liens (which can be enforced by law), and equity liens (which are valid only in a court of equity).

To create a valid lien it is important to ensure that the party it is acquired does indeed hold absolute ownership of the property in question; that the person laying claim on the lien has the right to do so; and that the lien s being placed in direct purpose of an agreement of payment made by the two parties.

Liens may be attached to personal property or real estate for the following reasons:

  • to pay tax debt - a tax lien
  • to pay for labor services rendered and/or construction supplies
  • for mortgages

Liens may only be attached by the party owed the money in the first place. Third party placement is prohibited.

A lien may be waived when the debt is either paid in full, or upon agreement between both parties. When liens go unpaid, the lien holder may require immediate payment, or take possession of the property in accordance with local lien laws and regulations. Liens may also be sold at auction for the price of the lien (regardless of the property's value), to a third-party investor. This is most commonly done with tax liens and mortgages.

Liens are a legal entity that must follow all of the laws and regulations of the local municipality and state government where the property is located.

 

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