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Property liens shouldn't be a surprise

By Sally Herigstad
Published: March 07, 2014

To Her Credit columnist Sally Herigstad
Sally Herigstad is a certified public accountant and the author of "Help! I Can't Pay My Bills: Surviving a Financial Crisis" (St. Martin's Press, 2006). She writes "To Her Credit," a weekly reader Q&A column about issues involving women, credit and debt, for, and also wrote for MSN Money, and, and has guested on Martha Stewart Radio and other programs.

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Dear To Her Credit,
I'm concerned that someone will put a lien on my property without my knowledge. Am I going to be notified if a lien is put on my property? If so, who will notify me? The town? The court?

It looks so easy to put a lien on someone's property that anyone can do it. Can a crook put a lien on my property even though no money is owed? Would I find out only when I sell the property?   -- Pamela


Dear Pamela,
It may look easy to put a lien on your property, but it's not. I know. I've had to put a lien on someone's real estate when they owed me money. It was a huge, time-consuming process, and the person who owed me money definitely knew about it well before the lien took effect.

That said, a lien on someone's property is very effective. In my case, someone owed me more money than I could afford to lose. His modus operandi was to ignore, ignore, and occasionally send a check that bounced. His habit of ignoring things worked in my favor when I took him to court and he didn't show up. He who ignores the court, loses. When he eventually sold his real estate, I got my money, plus expenses and interest.

As a general rule, people can't go around putting liens on your property without telling you, though there are exceptions.

A notable exception may be if you buy a newly built home. Depending on where you live, construction contractors and material handlers may be allowed to put liens on the property if they don't get paid for goods and services, without notifying you, the homebuyer. This could be true even if you paid the general contractor. To prevent this problem, you can request a compliance lien release form from each contractor before you make final payment on a building project. A lien may also be a surprise if you have work done on your existing home. Unpaid subcontractors are required in most states to send the owner a notification, but it may not reach you if you're living at your cousin's house while your new addition is built.

If someone is threatening to put a lien on your property, do everything you can to straighten it out. If you're having a dispute, document your side of the story by saving emails and other communication. If you can't clear up the situation, at least you'll have documentation to show the court if you need to.

If you're worried about whether someone has already put a lien on your property, there's one way to put your mind at ease. Go down to the recording office of your city or county government and see if there are any unexpected liens on your property.

While you're there, make sure the recording office has your correct mailing address, so you receive any notifications of liens filed in the future. An outdated post office box, for example, could make it hard for you to receive notices.

To avoid future liens or worries about liens, it helps to understand the process of placing a lien on property. A lien is often the result of a court decision or settlement, though some liens can be created just by a creditor's filing at a county recorder's office. Homeowner associations, for example, may often impose liens without a judgment.. The process varies greatly by state and location, the size of the lien, whether the lien is placed on personal property (such as a car or jewelry) or on real estate.

If you receive notice that someone has or is trying to get a judgment against you, it's important that you don't ignore it. You should respond in writing immediately. If you cannot clear up the issue and you are asked to appear in court, be sure to show up, with any documentation you have to help show you don't owe the money. It won't do you much good to be right if you don't try to defend yourself. Be sure to get qualified legal help in your state if necessary.

See related: What to do when debt collectors threaten to put a lien on your property