A lien release is when the holder of a lien, or security interest in a piece of property, lifts or waives the lien, rendering the property free to purchase.
Liens in Real Estate
A mortgage is the most common type of lien and represents the security interest the bank has in the real property. If you plan on selling a piece of real estate with a mortgage, the bank that holds your lien must be involved in the transaction to make sure that the lien is released or transferred before the transaction can take place.
If this does not happen and money is not repaid to the bank to service the debt, the bank can legally take possession of the house or prevent the sale of the property. When the lien release is signed, the bank acknowledges that it no longer has any claims on the real estate.
Liens Remaining on Property Long After Repossession
There are many ways in which property can be lost. For instance, if the owners default on their taxes, the city or county may take ownership of the property and sell it in a sheriff’s sale. When the property is purchased, it may still have the liens against it. A home may still have liens against it if the owners simply walk away and stop servicing their debts.
The bank still wants its original mortgage against the property, whether it is a home, vehicle, or other large purchase, and it can step in and prevent the sale if the lien is not paid. The buyer may need to hire a real estate or property attorney to advocate in court for a lien release. In general, ten years is the maximum amount of time that judgments and liens on a property last, so a lien release may not even be needed unless the bank fights it every step of the way.
Depending on real estate laws in your county or municipality, the judge may be able to compel the lienholder to release the lien, but you should consult with your attorney before attempting this process. A trial will end with the judge either granting the lien release or demanding that one party pay a part or all of the debt on the property before clearing the lien.
What to Do if a Lender Does Not Release a Lien
A lender is required to send you a notice of lien release at most 30 days following the repayment of the debt through purchase or through the final pay-off of the mortgage. If the bank does not provide this release, you may need to consult with your attorney.