Property liens are legal claims against a piece of property, which may have been recorded with or without the property owner’s consent. These liens affect the property owner’s ability to sell, transfer, and encumber the property. As a property owner, you should understand the different kinds of liens that can affect your real estate, and what steps you can take to remove them from your real estate so that you hold clear title to it. Clear title to the property allows you to freely sell, transfer, or encumber the property as you choose.
Types of Property Liens in Arizona
Various property liens exist under Arizona law. Some liens are general in that they cover all a debtor’s real and/or personal property. Other liens are specific in that they attach to one specific piece of real estate a debtor owns.
Likewise, some liens are voluntary, and some are involuntary. For instance, when you take out a mortgage loan to buy a home, you voluntarily give the mortgage company a lien on your home to secure the mortgage loan. Therefore, the mortgage company has a voluntary lien on your home. On the other hand, if you fail to pay your child support order when it becomes due, the state will place a lien on all your property without your consent, which is an involuntary lien.
The following are examples of Arizona’s most common property liens recorded against real estate.
Judgment Liens
If a property owner owes a debt, such as a credit card bill, a vehicle loan, a child support obligation, or a mortgage, and fails to pay it as agreed, the creditor or the company to whom the debt is owed can sue the debtor. The court will award the creditor a judgment for the money that the property owner owes on the debt. That judgment becomes a judgment lien on the real estate that the debtor owns.
Tax Liens
A federal, state, or local government entity that assesses and collects taxes can place a tax lien on a person’s real estate if they fail to pay taxes as they become due. For instance, the Internal Revenue Service (IRS) can place a lien for unpaid federal income taxes on a person’s home.
Mechanic’s Lien
If you fail to pay a contractor after you agreed for them to build your home or perform home improvements on your home, the contractor can place a mechanic’s lien on your property for the unpaid costs of the improvements. In addition to contractors, subcontractors, material suppliers, equipment lessors, and laborers can place mechanic’s liens on your property.
Restitution Lien
A court may place a restitution lien on your property if you are ordered to pay restitution or monetary compensation to a victim, usually in a criminal case, and you fail to do so.
Removing Liens from Your Property
In most cases, the most straightforward way to remove liens from your property is to pay the debt connected with the lien. For instance, paying the debt will remove the lien if you owe a tax debt. Likewise, if you own a judgment and pay off the judgment’s balance, the creditor will release the lien.
If a lien is inaccurate, fraudulent, or otherwise wrongful in some way, the property owner can challenge the lien in court. A court can order a lien to be released if it finds that an invalid lien was recorded against the individual’s property. Under A.R.S. 33-420, the individual property owner may also be entitled to $5,000 or three times the actual damages caused by the recording, whichever is greater, plus reasonable attorney’s fees.
Furthermore, some liens on real estate only last for a specific period before they expire, referred to as the statute of limitations. For example, a judgment lien is only valid for ten years from its recording date before expiring. A mechanic’s lien is valid only for six months.
However, there may be better strategies than waiting out the statute of limitations. First, not all liens are subject to a statute of limitations. Furthermore, state law allows creditors to renew many liens, even if a statute of limitations governs them.
We Are Here to Assist You with Your Arizona Real Estate Matter
We aim to help you understand the impact of liens on your real estate and what steps you can take to remove them. We will advocate on your behalf throughout your real estate transaction or in response to legal problems that may arise from that transaction. Contact the offices of Provident Law® today at (480) 388-3343 or online and schedule an appointment to speak with an Arizona real estate attorney about your legal matter.