Do You Have the Right to Place a Lien on Someone's Property?
We are often contacted by customers who want to know how they can file a lien on someone's house or vehicle. Many people have the idea that if someone owes them money for any reason, they have the right to place a lien on the debtor's property. Often, the answer to the question is "No". The mere fact that you are owed money by another person does not necessarily give rise to a lienable interest. In order to determine whether you have a lien right, it's essential to understand the nature of a lien.
Q. What is a lien?
A. A lien is a security interest granted over the property of one party until that party has fulfilled a legal obligation to a second party, such as payment for labor or materials provided by the second party to improve the property. "Property" can be either real property (real estate) or personal property (such as a vehicle).
Q. How is a lien right created?
A. In the US, there are basically two types of liens - consensual (voluntary) liens and non-consensual (involuntary) liens. An example of a consensual lien would be a mortgage, where the borrower agrees to grant the mortgage lender a lien over the borrower's property until the mortgage loan is paid. Non-consensual lien rights are created either by statute or by operation of common law, which gives a creditor the right to impose a lien over a debtor’s property, to secure repayment of money owed by the debtor to the creditor. Examples of non-consensual liens would be: attorney’s liens, tax liens, judgment liens, and mechanic’s liens. Mechanic's liens secure payment for work done to either personal property or land, and the lien attaches to the property or land on which the work was done. A mechanic's lien is also known as a construction lien, builder's lien, materialmen's lien, garagekeeper's lien, laborer's lien, or supplier's lien (depending on the jurisdiction). Strangely enough, it often does not refer to a lien by a mechanic for work done to a vehicle!
Canadian law does not provide for tax liens, but it does provide for builder's liens and solicitor's liens. In the case of a judgment rendered in a lawsuit, a writ is usually issued by the court and placed against any personal property that you own, however, some property is protected by writs. In both countries, each state or province has its own laws protecting the lien rights of contractors, labourers, and suppliers. But the onus is on the lienholder to perfect the lien by serving required notices within the prescribed time periods, and filing or registering its interest in accordance with the lien laws. Failure to do so will generally result in the loss of the party's lien rights.
Q. I loaned money to someone and they haven't paid me back. Can I file a lien?
A. You cannot file a lien unless the borrower signed both a promissory note and a mortgage or deed of trust against their property. Otherwise, you'll need to take them to court and get a judgment against them. You can then file a judgment lien (in the US) or get a writ (in Canada) to enforce your judgment.
Q. I built my neighbor's backyard deck and he promised to pay me for it, but he hasn't. Do I have a lien?
A. Did you enter into a signed contract to perform the work? If the answer is yes, and if you complied with the lien laws in your state/province during the performance of the work, then you probably do - provided that you didn't sign a full release and waiver of your rights upon completion of the work. Consult a lawyer to find out whether you can file a lien claim.
Q. My tenants are behind in the rent. Can I place a lien on their vehicle?
A. That depends. Some US states have enacted laws that grant landlords a lien over the tenant's goods if the tenant fails to pay the rent, but the procedure for enforcing the lien is different in each case. In other jurisdictions the landlord has a right of distress or distraint, which is a seizure of the tenant's property. In all cases, there are legal procedures that must be followed, and generally an application must be filed in court.