Liens can be incredibly valuable tools to force payment of debts, and can often mean the difference between getting paid nothing on a debt and getting paid in full. To properly protect and secure debts, it is critical to understand what liens are, how they work, and when creditors can use them.
What is a Lien on a Property?
A lien is an encumbrance on property to secure payment of a debt. An “encumbrance” is any right to or interest in property that is held by someone other than the property’s owner and that diminishes the value of the property. For example, a deed of trust on land is typically a lien that entitles the deed’s beneficiary to sell the land if the debt that the deed secures is not timely paid.
There are four types of liens that we typically see:
1. Common Law Liens
A common law lien is one that arises from court decisions and case precedent.
Examples of contractual liens are deeds of trust, mortgages, UCC financing statements, and security agreements that, under certain circumstances, give third parties rights to take, sell, or dispose of personal or real property that is the subject of those security instruments.
2. Equitable Liens
An equitable lien arises as a tool of equity where there is no valid lien at law, and one is needed to prevent injustice.
3. Contractual Liens
Contractual liens are created by agreement and consent.
4. Statutory Liens
Statutory liens are formed by operation of statute.
Examples of statutory liens are mechanic’s liens, judgment liens, crop liens, landlords’ liens, and labor liens on things like orchards, timber, and lumber.
Contractual and statutory liens are the most common liens in the construction, real estate, and commercial contexts, and oftentimes overlap. For example, a debtor can agree to give a lender a deed of trust on a home to secure debt, and statutes that apply to such deeds of trust detail the nature of the interest the lender has in the property and how the lender must foreclose on the deed of trust if the debtor fails to pay.
Who Can Put a Lien on a Property?
A creditor’s ability to put a lien on property depends on the context in which the debt arises.
In the mechanic’s lien context, RCW 60.04 details the persons and entities who can record liens against the real property and improvements where a construction project is located. Generally, mechanic’s lien claimants must perform work to improve the property, and they often must fulfill specific licensing and preliminary notice requirements. If all of these requirements are met, the mechanic’s lien claimant can file a lawsuit to foreclose on the lien and sell the property to pay the debt that the lien secures.
In the context of judgment liens, the creditor must obtain a judgment and file the judgment in the execution docket of the court in the county where the debtor’s property is located. If the property is real property, creditors should also record the judgment in the county where the debtor’s property is located. If other conditions are met, the judgment creditor could then obtain a writ of execution allowing the sheriff to sell the debtor’s property at auction to pay the judgment.
Deeds of trust must likewise comply with statutory creation and perfection requirements such as the need for the deed of trust to be in writing, for it to be properly executed and notarized by the debtor, and for the creditor to follow certain notice and sale procedures if the debtor defaults on the debt.
How to Put a Lien on a Property?
Imposing a lien on property, of course, depends on the context. In contexts such as mechanics’ liens, deeds of trust, and mortgages, creditors must timely record the documents that create the liens with the county auditor’s or recorder’s office where the liened property is located. Judgment liens should also be recorded against real property in the county where that property is located, but are also created automatically when filed with the court in the county where the debtor’s property is located. Other liens, such as UCC-1 filing, require creditors to file the document creating the lien with the Secretary of State where the debtor is located.
Need Additional Support on Filing a Lien on a Property?
If you have lingering questions about how liens on property work in Washington, whether you’re considering filing one or need to respond to a lien on your property, don’t navigate these complex legal waters alone. The Levy | von Beck | Comstock | Chastain team is here to help you understand your rights and options, address your unique situation, and guide you through every step of the process with clarity and confidence.
Reach out today with any questions or to schedule a consultation; our expert team is ready to provide the support and advocacy you deserve.