Types of Property Liens in Texas & What You Should Know
With any debt, there are risks for both the lender and the borrower. One of the ways in which lenders protect themselves against potential nonpayment risks is through liens, such as property liens.
A property lien is a legal claim against a piece of personal or real property due to contractual or statutory obligations. When a creditor covers expenses on behalf of a property owner, a lien grants them a financial interest in the property until repayment is made. Liens can encumber a property, meaning they must be settled before a sale or transfer can occur. In some cases, unresolved liens can even lead to foreclosure.
There are several types of property liens, each with unique implications for property owners. In this blog, we’ll explore the different types of property liens in Texas, how they work, and what you need to know to protect your assets.
Understanding these liens can help you navigate legal and financial challenges, ensuring you make informed decisions about your property.
General Liens vs. Specific Liens
General liens can be placed on all property owned by a debtor, not just real estate. For example, if you are going through a divorce, a general lien (attachment lien) can be placed on your property to prevent you from selling anything during the divorce proceedings.
Specific liens only apply to specific assets. A mortgage lien, for example, is specific to the house you took a mortgage loan on. So, if you default on your mortgage payments, the bank could only claim a security interest against that specific property.
Voluntary Liens vs. Involuntary Liens
There is a common misconception that liens are only obtained due to failure or refusal to pay a creditor. However, that is not always the case. In Texas, you may face two primary types of liens: voluntary and involuntary.
- As the name suggests, a voluntary lien (or consensual lien) is a lien that a debtor willingly agrees to. The most common example of a voluntary lien would be a mortgage lien, so if you financed the purchase of your home through a mortgage lender, you willingly agreed to use your property as collateral to secure the loan. The mortgage lender, therefore, has the right to place a lien on your property, giving them legal rights over the property.
- An involuntary lien (or non-consensual lien) is levied against your wishes and is the result of not fulfilling your financial obligations. These liens are very serious and could even result in foreclosure. A property tax lien is one of the most common examples of an involuntary lien. The two types of involuntary liens are judicial and statutory.
- Statutory Lien - A statutory lien is one that is granted by a state or federal law. A mechanic’s lien, an IRS lien, or a property tax lien are the most common types of statutory liens.
- Judicial Lien - A judicial lien occurs when a court grants a creditor a stake in a debtor’s property after a court judgment. These liens arise from a wide variety of circumstances that could have landed you in court and are not limited to real estate – they could even include money. For example, as judicial lien could be used to collect child support or to secure compensation for an injured party if you caused them harm through negligence.
What Are the Different Types of Property Liens in Texas
Mechanic’s Lien
A mechanic’s lien can be attached to your property if a contractor or mechanic performs work on it and is not paid. Some examples include a mechanic repairing your car or a contractor installing a furnace in your home. If you do not pay the service provider and sell the property, the lien serves as a security interest and will allow the creditor to claim a portion of the proceeds from the sale of the property to pay off the debt you owe. If a mechanic’s lien is placed on real property, it may delay or inhibit the sale of the property until the debt is paid and the lien is removed.
Mortgage/ Deed of Trust Liens
Mortgage liens are voluntary liens levied for the debt accepted to buy a home or other property and are specific to the mortgaged property. The lender can foreclose on your property if you fall behind on your loan payments or break the loan agreement. In order to remove this lien, the mortgage must be paid off in full.
Judgment Liens
If you are involved in a lawsuit and lose, you receive a judgment from the court outlining what needs to be paid to the person who won the lawsuit. If this court judgment is not paid, the creditor (the winning party) can place a lien on your property. In Texas, judgment liens can remain attached to your property for up to 10 years.
Estate Tax Liens
If the estate taxes are not paid on assets that have been passed down after death, estate tax liens are involuntary, general liens issued by the government to secure payment of the outstanding taxes. Texas does not have a state-wide estate tax. However, you or a family member may still have a federal estate tax liability.
Attachment Liens
An attachment lien is a legal hold that is placed on someone’s property to prevent them from selling it while a legal matter is ongoing. This type of lien is often used in situations such as divorce or bankruptcy proceedings to prevent the sale of the property. Attachment liens are involuntary and can either be general (applying to all of the owner’s property) or specific (applying only to certain items).
Navigating Liens on Your Texas Property
Managing the complexities of real estate transactions and property ownership in Texas requires an understanding of liens, a common yet nuanced aspect of property law. A lien, in its simplest form, is a legal claim or hold on a property, typically due to unpaid debts or obligations. When delving into which of the following is a lien on real estate, it’s crucial to recognize that liens can vary significantly in nature and have implications for property owners and potential buyers. Among the various types of liens on property, understanding what type of lien is voluntary versus involuntary is foundational. A voluntary lien is one that a property owner consents to, with the most common example being a mortgage. Contrary to some misconceptions, a mortgage is not a general lien but rather a specific lien, meaning it is tied specifically to the property used as collateral for the loan.
The distinction between general vs specific liens is important in understanding the broader landscape of liens. General liens can be placed on any and all of the debtor’s assets, not limited to real estate, based on broader claims against the individual’s financial obligations. In contrast, specific liens target particular properties and are often the result of specific circumstances, such as the completion of work or services that have not been compensated. This leads to the scenario of how to put a lien on the property for money owed, a process that typically involves legal action and the formal recording of the lien to publicize the claim against the property. On the other hand, an involuntary specific lien does not require the property owner’s consent and can arise from situations like failing to pay taxes or losing a lawsuit, resulting in a judgment lien against the property.
Property owners often ask, “How long does a lien stay on your property?” The duration can vary widely depending on the type of lien. For instance, a judgment lien in Texas can last up to ten years, with the possibility of renewal, emphasizing the lasting impact of liens on property ownership and the importance of resolving them promptly. This leads to the critical question of what happens if you get a lien on your house. The presence of a lien can significantly restrict your ability to sell or refinance your property, as it signifies to potential buyers and lenders that the property is encumbered by debt.
Moreover, the process of buying a house with a lien against it involves additional due diligence. Prospective buyers must thoroughly investigate any existing liens to understand their nature and potential impact on the property transaction. This underscores the importance of using a title company or knowing how to find liens against my property, a process that generally involves searching county records or consulting with a legal professional to uncover any claims or encumbrances that may exist against the property. Understanding a tax lien on a house is particularly crucial among the specific types of liens. A tax lien represents the government’s claim on properties due to unpaid property taxes and can lead to foreclosure if not addressed, highlighting the severe consequences of neglecting such financial obligations.
The intricacies of liens, from identifying the various types of liens on property to navigating the resolution of these legal claims, are integral to effectively managing and transacting real estate Whether it’s learning how to place a lien on a property for money owed, grappling with the implications of an involuntary specific lien, or considering the purchase of a property with existing liens, the ability to navigate these legal waters can significantly impact one’s financial health and property rights. Understanding the mechanisms for resolving liens, such as payment, negotiation, or legal action, is essential for clearing the title to a property and ensuring its free and unencumbered transfer. In essence, the realm of property liens is a critical aspect of real estate that demands careful attention and understanding from property owners, buyers, and professionals alike, ensuring that all parties are well-informed and prepared to address these issues as they arise.
Property Tax Liens
On January 1 of each year, a lien is attached to all Texas properties with outstanding property tax balances. The lien will be extinguished once the outstanding balance (including all penalties and interest) has been paid in full. However, suppose you have a property tax debt applicable to your property and still neglect to pay your tax liability. In that case, local taxing authorities can choose to start judicial foreclosure on the property at any point while the lien is attached. If someone else pays your delinquent property taxes, you may wonder whether they can claim ownership of your property—learn more about property ownership and paying property taxes in Texas to understand your rights.
If you are struggling to pay your property taxes, you can settle the balance and avoid any more expensive penalties and interest with a property tax loan. For tailored support to manage your tax obligations, consider exploring residential property tax loans to help you efficiently settle your debts and avoid foreclosure.
Avoid Property Tax Liens with Help from AFIC
Falling behind on your property taxes is easy; however, the sky-high penalties and interest can make your outstanding property tax balance even more expensive, making it much harder to catch up.
Regaining ownership of your property once the tax lien foreclosure process starts can be highly stressful and challenging. You risk losing your property to someone else at an auction, and even though reversing the sale is possible in some cases, it is a lengthy and expensive process. To avoid losing your home to a tax foreclosure sale or to prevent a lien from being placed on your property in the first place, you need to settle your property tax bill as soon as possible.
A property tax loan from AFIC will help you settle any outstanding property taxes immediately and give you the financial freedom to repay the balance in installments rather than one lump sum. At AFIC, we prioritize our customers and will work with you to find the best property tax loan for your personal and financial situation.
About AFIC
Founded in 1946, American Finance & Investment Co., Inc. (AFIC) started by serving the financial needs of El Paso and has since grown to become one of the top property tax lenders in the state of Texas, with a sterling track record for over 65 years with the Better Business Bureau.
We offer our clients an affordable, hassle-free way to ensure that your account with the local government tax office is paid in full and will work out a manageable repayment plan for you. AFIC can provide you with an instant quote by completing the form on our homepage. For qualifying properties, we can help you pay off your delinquent property taxes and offer you the following benefits:
- Quick and completely online process
- No money down
- No credit check
- Free 30-day rate match
- Match competitors and beat their rate by 1%
- Avoid high penalties and foreclosure
We pride ourselves on finding solutions to suit the unique needs of our clients. If you would like to discuss our property tax loans, please contact our experienced team at AFIC today.
