Utah Code Title 38: Lien Against Stored Property–Attachment And Duration–Search For Financing Statement Prerequisite To Enforcement Of Lien. 1. When an owner and an occupant enter into a rental agreement, the owner and the owner’s heirs, executors, administrators, successors, and assigns have a lien upon all personal property located at the self-service storage facility for rent, labor, or other charges, present or future, in relation to the personal property and for expenses necessary for its preservation or expenses reasonably incurred in its sale under this chapter. What Is a Possessory LienA possessory lien grants a creditor the right to remain in possession of a property under the lien until the debtor has satisfied his or her debt. A lien is the legal claim that one person has over the property of another as security for the payment of a debt. The property rests in the hands of, or is possessed by, the individual who grants the lien. For example, if an individual buys something on credit, the item will not be in his or her possession until the debt to the creditor has been paid. This is different from most liens in the United States, where the lienee is granted possession of the property before the debt is satisfied, as is the case in a home mortgage. How Possessory Liens Are Applied to Commerce and TradeThe concept of the possessory lien has its roots in commerce from earlier eras. For example, in the past an innkeeper might be granted a lien on the property of the guests for the costs of them sleeping at the inn, having meals, and making use of other amenities there. The possessory was deemed appropriate given the high duty of care innkeepers took on. It is believed that early courts gave the possessory lien structure. It was a means to grant relief against charges in commerce, in particular for the providers of services to others when they were otherwise not able to sue for a reasonable worth and value of those services. In addition to innkeepers, other forms of commerce and trade can make use of possessory liens. This can include vendor’s liens, pledges of chattels, and garage men’s liens. For example, if the owner of a car does not pay charges for the towing, repair, and storage of a vehicle, the garage where the car is may hold the vehicle until those costs are paid off. The vehicle could ultimately become forfeit and sold if the garage has power of sale. Voluntary and Involuntary LiensCreditors, such as a mortgage or car lender, can ask borrowers to put up the purchased property as collateral as part of the condition of the loan. Considered a “voluntary lien,” this type of lien allows the lender to foreclose on the real estate or repossess the vehicle if the borrower fails to make timely payments or breaches (breaks) some other condition. Not all creditors need a borrower’s consent before getting a lien, however. Some creditors can obtain such rights without your permission. These liens are known as “involuntary liens.” Creditors with Involuntary LiensSome creditors have the right to attach your property by law. Others can win lien rights in court. Here are some examples of involuntary liens. Judgment LiensMost unsecured creditors, such as the holders of credit card debt, medical bills, and personal loans, must first file a lawsuit, win the action, and get a money judgment before obtaining lien rights. With the judgment in hand, a judgment creditor can place a judgment lien on your real estate and occasionally on personal property depending on the state in which you live. Other Types of Involuntary LiensMany creditors have a right to place a lien on your property without filing a lawsuit. • Property tax liens. Usually, a property tax lien takes priority over all other mortgages or liens on the property, even if the property tax lien was placed on the property after the other liens. If the taxes are not paid, the government can have your property sold to pay the property taxes. The government must follow whatever procedure the state prescribes, and you might have the opportunity to pay the taxes and costs and get your property back even after the “sale.” If you don’t pay your taxes, to protect its mortgage, the lender will usually pay the taxes and add that to your mortgage debt. The most common examples for voluntary liens are mortgages on a home and liens placed on cars that are financed. Voluntary liens can be placed on any type of property with value. The point of the voluntary lien is for a lender to secure collateral for a debt or service rendered. Example of Borrowing against Home EquityA married couple purchased their home 20 years ago with a mortgage of $200,000. A voluntary lien had a claim on the house until the mortgage was fully paid off. Once the debt was repaid, the lender no longer had a claim to the home, and the couple had full legal ownership. A few years later, the couple wants to build out an extension and a basement for their garage. The project is likely to cost more than $50,000, which the couple does not have on hand. They decided to borrow against the equity of their home. To secure a $50,000 loan from a lender, they created another voluntary lien by borrowing against the equity they had in their home. A lender, once again, has a claim against the property for the value of the amount loaned. The couple now has $50,000 cash to expand their garage, and they will make payments to the lender until the debt is repaid. Once that debt is paid off, the second voluntary lien will be lifted. How Are Non-Mortgage Liens Enforced?Once a non-mortgage lien is placed on your home, the holder of the lien can choose to take one of two routes. The lien holder can simply sit back and wait for the day you decide to sell or refinance your home. No buyer will want to purchase your home, nor will any lender refinance your mortgage, with the lien still attached. At that time, you’ll be forced to pay off the holder of the non-mortgage lien to have the lien removed. The holder of the non-mortgage lien may also enforce its lien by foreclosing, although this is less common. The process of foreclosing on a non-mortgage lien is governed by state law and varies depending on the type of lien that is being foreclosed. For example, property tax liens may sometimes be foreclosed outside of court, while the holder of a mechanics’ liens must typically sue the homeowner in court in order to foreclose. Homestead ExemptionOne factor is the homestead exemption, which exempts a certain portion of the value of a debtor’s primary residence from liability to certain creditors. (Depending on the state, the homestead exemption might not apply to mortgage liens, mechanics’ liens, and property tax liens.) The amount of the homestead exemption varies from state to state from zero in some states to an unlimited amount in others. The Priority of the Non-Mortgage LienAnother factor is the priority of the non-mortgage lien. Many homeowners have one or more mortgage liens recorded against their property, and these mortgage liens typically have priority over subsequently recorded non-mortgage liens. (There are exceptions to this rule. For example, some property tax liens have super-priority over all liens recorded against the property. For more on the priority of liens, see our article The First in Time, First in Right Rule.) The Cost of ForeclosingA third reason non-mortgage liens are rarely foreclosed is the cost of foreclosing. If the non-mortgage lien is foreclosed through court, the party doing the foreclosing must pay all of the substantial costs of the typical lawsuit. Even if the non-mortgage lien is foreclosed outside of court, there are still costs involved, such as the cost of publishing notice of the foreclosure sale in a newspaper and payment to the sheriff or other official administering the foreclosure auction. How Do Non-Mortgage Liens Affect Mortgage Liens?Non-mortgage liens typically have little impact on mortgage liens. Most non-mortgage liens are recorded after mortgage liens (the reason being that lenders will not loan money if there is a judgment, tax, or mechanics’ lien recorded against the property) and therefore have a lower priority than the mortgage liens. This means that, in any foreclosure sale, the mortgage liens will be paid first out of the proceeds, and the remaining proceeds will be paid to the non-mortgage liens in order of priority. As described above, this alone may be enough of a deterrent to keep a holder of a non-mortgage lien from foreclosing, as there often will not be enough equity remaining to cover the lower priority liens once the mortgage is paid off. One exception touched upon above relates to property tax liens. In a number of states, property tax liens will take priority over all other liens, including mortgage liens, regardless of when the lien was recorded. Because of the super-priority of property tax liens, many mortgages give the lender the right to collect property taxes from the borrower or foreclose if the homeowner fails to pay property taxes. In the event of foreclosure of a property tax lien, a mortgage lender will often pay the delinquent property taxes, roll that amount into the outstanding mortgage debt, and foreclose on its own. How to Remove a LienIf you own property with a lien against it, you may be stuck with that property until you clear up any issues causing the lien. Liens can generally only be removed by the person or organization that created them, but there are several exceptions. Pay It OffUltimately, if a lien is legitimate, you may need to pay debts to get the lien released. The process might be easier than you think; liens are routinely removed when you sell your home or your financed auto. SettleTry negotiating if you don’t have enough to pay off a debt. Creditors might be willing to accept less than you owe if they can get something now and put the loan behind them. Get It CorrectedIf you believe a lien is not legitimate, contact the lien-holder. In some cases, lien releases get lost or forgotten. For example, you might buy a used vehicle from somebody who previously had an auto loan, and the lien release fell through the cracks. Bringing the matter to the right person’s attention might be all that’s needed. Dispute ItWhen there’s any disagreement, things get much more difficult. You might need to bring legal action against a lien holder to have the lien released. It’s also a good idea to investigate whether or not any claims are still valid—some liens expire after several years. Free Initial Consultation with LawyerIt’s not a matter of if, it’s a matter of when. Legal problems come to everyone. Whether it’s your son who gets in a car wreck, your uncle who loses his job and needs to file for bankruptcy, your sister’s brother who’s getting divorced, or a grandparent that passes away without a will -all of us have legal issues and questions that arise. So when you have a law question, call Ascent Law for your free consultation (801) 676-5506. We want to help you!
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