The legal dictionary defines lien as: any official claim or charge against property. For a claim or charge to constitute a lien, it must materialize in one of three ways: 1) by consent; 2) by judicial determination; or 3) by statute.

Consensual Lien:

Consent is basic to human relations. Consent is granted from one individual to another. Example: a young man asks his girlfriend’s father for his daughter’s hand in marriage. The father, by giving his permission to the marriage, will have consented to the young man’s request.

In the context of a consensual lien, the consent is reciprocal by nature. I will use the real estate mortgage as our example of a consensual lien. The homeowner asks the bank to consent to a loan, while the bank reciprocally asks the homeowner to consent to the offering of its land as collateral for the loan. When both sides consent, there is created a consensual lien.

Judicial Lien:

Human relations frequently create disputes. Many times a dispute will require judicial resolution. The court may, at its discretion, allow for a lien to be placed on property of a litigant. This lien is certainly not consensual in nature.

The judicial lien is often found at the completion of divorce proceedings. Let us say that Mr. and Mrs. Property divorce. The property settlement agreement awards the property to Mrs. Property. However, the judge places a lien in the amount of $10,000.00 on Blackacre, now owned by Mrs. Property. This lien is in favor of Mr. Property. The judicial lien is true to its name; it is a lien, determined by a judge, to protect the interest of a litigant.

Statutory Lien:

Statutes are laws enacted by state legislatures. These laws, although influenced by court decisions, are not judge made. Example: The Michigan Construction Lien Act, which grants lien rights to unpaid contractors, does not require consent, nor does it require the contractor to initiate time-consuming and expensive litigation. The Michigan Legislature, in enacting the Michigan Construction Lien Act (the Act), had made a determination that a qualified worker should have a simple and inexpensive way of protecting itself from nonpayment. If the contractor fulfills the statutory requirements of the Act, he/she will have a valid lien on the property where work was contracted for and performed. A statutory lien is extremely powerful and beneficial to its holder.

Conclusion:

Regardless of which method a lien arises, the proper establishment of a lien is critical. Once established, the holder has a legal interest in the subject property. Ultimately, this gives the holder viable leverage against the land owner. In today’s market, collecting on a debt can be quite an adventure. There are simply no guarantees that a debt will ultimately be satisfied. However, the establishment of a valid lien will greatly aid the holder in its efforts.

DP for State Street Title Agency, LLC
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