Liens
A lien is basically a claim, or a debt, against a piece of property, also sometimes called a "security interest." The claim typically belongs to a business or individual who is owed money related to that property. The lien may be consensual, as in the case of financing a car through a lender. Or, a lien may be involuntary, meaning that the lien was either created by a government entity - think tax lien, or by an individual who is authorized by law to claim a lien - think mechanic's lien.

Claiming a lien protects the lien-holder by preventing the owner of the property from selling or otherwise transferring title to someone else before the claimant is paid. If the lien is not paid voluntarily, it gives the lien-holder a course of action in repossessing the property and selling it to cover the debt. And finally, placing a lien on the property establishes a priority among competing creditors who may also claim an interest in the property.

Generally, a lien can only be placed on property that is related to the debt that is owed. For example, a building contractor who claims a lien can only do so against the home or business they did the work to - they can't place a lien on other personal property such as a car or boat. And an auto shop can only place a lien on the vehicle they worked on - they can't place a lien on the vehicle owner's second car or on their home. Of course, Uncle Sam is exempt from this; the government can place a lien on any type of a taxpayer's property if they are owed for unpaid taxes or for civil improvements. Also, a claim of lien is generally not allowed on government-owned property.

The process for placing a lien on a property is governed by state statute, so you'll need to check with your state's laws. In many cases, the amount of the lien can be for the actual cost of supplies and the cost of labor, plus legal fees, storage fees, or other reasonable miscellaneous fees associated with the cost of collecting payment.

But, over-inflation of the amount of the lien may be cause for dismissal of the claim, so it is important to accurately document the actual work or repairs completed, as well as all costs involved in the work done to the property. Also, there is often a statute of limitations on placing a lien on a property, so acting fast is important.

Mechanic's Liens
A mechanic's lien started off as pertaining only to a claim for repairs of a vehicle, but have recently also made their way into the construction industry. Mechanic's lien laws on real estate are complicated and vary widely by state, so seek legal counsel if a mechanic's lien has been placed on your property or if you need to place one on a property.

Mechanic's liens on automobiles are usually in relation to labor and materials in making repairs to the vehicle. Most states allow the auto shop to hold a vehicle, and charge storage fees, until the repair bill is paid in full. There may be a limit on the number of storage days that may be charged if the mechanic claims a lien on the vehicle.

If a car owner agrees to have repairs done, and then decides to abandon the car at the garage rather than pay for the cost of the repairs in a timely manner, the auto shop or mechanic may place a claim of lien on the car, register the lien with the DMV, and sell the vehicle to get the amount they are owed. It generally doesn't matter how much the car is worth or how little the cost of the repairs were.

Many states require that the claimant have physical possession of the vehicle in order to place a mechanic's lien on a vehicle. This is why most states allow the shops to keep a vehicle until the repairs are paid for, so that the mechanic has a course of action to ensure payment.

If the vehicle is not in the possession of the business or individual who the debt is owed, then the shop or mechanic might not be allowed to place a claim of lien on the vehicle. The next course of action may be to take the debtor to small-claims court.

The claim of lien must be prepared in proper legal form and recorded in a timely manner. It is usually recorded with the county recorder's office where the property is located in the case of real estate, or in the Secretary of state's office in the case of property other than real estate. In addition, the lien claimant must make reasonable efforts to give notice of the lien to the owners of the property, and sometimes others who have an interest in the property.

The laws vary by state depending on the type of lien and the type of property, so it's important to seek competent legal counsel familiar with the lien laws in your state if you find you need to place a lien on a property.

You can get the appropriate mechanic's lien forms for free at your courthouse. Then you'll need to fill in the form, have it notarized, and then have it recorded at the appropriate office - the DMV for liens on automobiles. There are also down-loadable forms and instruction kits, prepared by an attorney, for sale on the internet for about ten to twenty dollars if you are familiar with the process and want to do-it-yourself.

Or, you can leave it to the professionals and seek a legal office that specializes in lien claims; some will charge a flat-fee of $70 to $200 to file your claim for you.



Disclaimer: This article is for informational purposes only and not meant to be used as legal guidance; please seek professional legal counsel familiar with the laws in your state.



Sources:
ehow.com
Oregon State Bar
wikipedia.org
wisegeek.com