What is a Lien in Tennessee?
In Tennessee, a lien is a legal claim to assets (cars, homes, businesses) that an entity can make against an indebted party. Liens are entered voluntarily, or an entity can place a lien on assets without another party's consent. Liens persuade debtors to pay back debts by threatening to seize the debtor's assets. Courts, organizations, entities, and individuals can place liens on assets without the debtor's consent. These liens, otherwise known as involuntary liens, typically occur following unpaid taxes, debt, or a contract violation. If an individual fails to pay back debts or cannot agree to a proposed payment plan, lienholders can legally seize and take ownership of assets. Specific liens name every asset claimed while general liens include all of the debtor's assets until the debt is covered. However, liens may not be enforced until Tennessee courts issue a judicial order to that effect.
Types of Lien in Tennessee
In Tennessee, liens can be categorized as statutory or consensual.
Statutory liens are liens generated by operations of the law and are established without the lienee's consent. This type of lien is also known as involuntary liens. Examples of statutory liens are tax, mechanics, and home-buying liens. On the other hand, consensual liens are voluntary and are usually created by an action taken by the lienee. Consensual liens require both parties to agree to take effect, unlike statutory liens. A mortgage lien is a typical example of a consensual lien.
What is a Property Lien in Tennessee?
Tennessee property liens are liens wherein the assets claimed are property instead of financial accounts and businesses. Judgment liens, mechanic's liens, and mortgage liens are all examples of liens where the assets claimed can be property. Property liens can also be voluntary or involuntary and general or specific. Mortgage liens are a typical example of voluntary property liens. Mortgages can be entered into by parties who want to purchase a house but cannot afford to pay in full. If a party is delinquent or does not make the mortgage payments, the lien holder can foreclose the home. In 2019, Tennessee saw the mortgage delinquency rate rise three percentage points to 7.35%. Foreclosures in Tennessee decreased by 15%.
How Do You Know if a Property Has a Lien in Tennessee?
The best way to know if a property has a lien is to conduct a title deed search online via the county recorder, county assessor, county clerk's website, or visit their office. Also, real estate buyers can choose to work with a title agent to conduct a lien search on the property. These agents are professionals in property titles and are good at locating liens, pulling property records, and documenting the full history and its title. In addition, real estate buyers can purchase title insurance through this agent to protect against any title issue that might come up later on. However, the only downside of using a title agent is that it usually comes with a fee.
Individuals can check with their local county clerk's office for more information regarding a lien on a property.
What is a Tax Lien in Tennessee?
Tax liens occur as the result of tax delinquency. The Tennessee Department of Revenue manages tax issues in the state. If a party has unpaid state taxes, the Department of Revenue can notify the party of their intention to file a lien. If the debtor consents to repay the taxes, they can agree to a payment plan or pay the debt in full. Parties can pay tax debt using the Tennessee Taxpayer Access Point (TNTAP) tool. If the party refuses or cannot pay, the department can act on the lien and seize the assets listed in the lien.
What is a Mortgage Lien in Tennessee?
Tennessee mortgage liens are voluntary property liens explicitly placed on homes. As housing costs can be expensive, this lien is advantageous as it allows the party to buy a house and pay in installments. When the parties agree, the lien names the house as the collateral property. The lienholder, or mortgage lender, can take ownership of the home if the party cannot or refuses to make payments.
What is a Mechanics Lien in Tennessee?
Mechanic's liens are beneficial for laborers who work on construction or rehabilitation of personal property. These liens guarantee that parties are paid for all work when contracted by a company or individual. If property owners fail to compensate workers, lienholders can seize the property. According to Tennessee Code Title 66, Chapter 11, all contractors, subcontractors, material and equipment providers, architects, and engineers have the right to file a lien.
When laborers begin work on a private property project, they can file a preliminary notice of lien. If the pay is slow or late, the workers can file a notice of intent. If the property owner does not pay, the mechanic's lien will affect until the laborers receive compensation.
What is a UCC Lien?
Federal regulations regarding commercial transactions, such as transactions between multiple businesses, consumers and businesses, and businesses and government entities, are called The Uniform Commercial Code (UCC). Although the code is federal, violations of the code are state offenses. The UCC allows creditors to file legal interest in a debtor's assets by filing a UCC-1 form.
What is a Judgment Lien?
A judgment lien in Tennessee is an involuntary lien that the court imposes on an individual's or entities' property. According to Title 25, Chapter 5 of the Tennessee Code, judgment liens come from a money judgment in court. A money judgment is a court order that occurs after a civil lawsuit. When a money judgment is issued, the court can also impose a lien of the defendant's property to guarantee compensation. The judgment states that the debtor or defendant must pay a specific amount to the creditor or plaintiff, or the creditor can take action on the lien. If a debtor refuses to or cannot pay the creditor, the creditor can claim legal ownership of the debtor's assets. Assets included in a judgment lien are homes, cars, land, furniture, and real estate.
Voluntary Lien Vs. Involuntary Lien in Tennessee?
Voluntary and involuntary liens are also referred to as consensual and non-consensual liens. Voluntary liens are agreements typically made between two parties signing a contract. Examples of voluntary liens arrangements are mortgages and liens placed on cars. Liens can be beneficial when a party wishes to pay off the property over time rather than at once, and voluntary liens often come with an agreed-upon payment plan. Involuntary liens, the counterparts of voluntary liens, happen against the will of property owners. A typical example of an involuntary lien is a tax lien, which occurs due to unpaid property taxes. Involuntary liens can be initiated by business entities, courts, or organizations to recover their debt.
How Do I Check for Liens in Tennessee?
Liens are typically a public record in Tennessee. Hence, individuals seeking to check for liens might need to contact the county recorder, county assessor, or county clerk's office where the property is situated. The process of checking for liens depends on the county, but generally, individuals can search property records on the assessor's website by typing the address. However, in local areas, individuals may need to visit the office in person, put a call through, or visit the county courthouse for records.
Free Lien Search in Tennessee
Individuals can conduct free lien searches via government agencies' websites in Tennessee. A typical example is the Tennessee Secretary of State that provides free Motor Vehicle Temporary Lien Search. Also, an individual can choose to visit the physical locations of these relevant agencies.
How Creditors Collect Payment Through a Lien
In Tenneessee, creditors can collect payment through a lien in diverse ways. The creditor can wait until the property is sold to get paid the judgment plus accrued interest from the escrow. The creditor can also force the property owners to sell the property and pay what they owe with that money. This can only work when there is enough equity in the property to pay all the liens and foreclosure costs.
If the property owner is employed, the creditor can get a wage garnishment that will require the employer to withhold the property owner's wages until the debt is fully paid. The creditor has the legal right to collect about 25% of the debtor's earnings. This only works if the debtor is employed by someone else. A wage garnishment does not work against self-employed debtors. The creditor can also get a levy on the property owner's bank account. However, the creditor will need to be conversant with specific information regarding the debtor's account. For instance, the branch where the account is kept and the account number may be required.
How Do I Get a Lien Removed in Tennessee?
The most straightforward way to remove a lien from a property in Tennessee is to satisfy the debt. Once the debt has been paid, the lienees can file a Release of Lien form. This form can be found online, or lienees can get the form at the county clerk's office. Lienees must do their due diligence to ensure that the form contains necessary information like the lienee's name, the lienor's name, proof and amount of the debt paid, and the property's description and address. Afterward, the lienees must make sure that the lienor signs the release of lien form before a notary and file the form as evidence that the debts have been paid. This filing can be done at the county recorder's office, at which point it becomes a public record. A fee is usually required to file a release of lien form.
Another option for removing lien includes contesting the lien in court and proving that it's invalid. If a lienholder can't prove their lien, then it gets dismissed.
How Long Does a Lien Stay on Your Property in Tennessee?
The length of time that a lien stays on a debtor's property in Tennessee is mainly dependent on the type of lien. For instance, an involuntary lien such as a judgment lien is required to remain attached to the lienee's property for up to 10 years even if the property changes hands. In contrast, a voluntary lien such as a mortgage lien can stay on a lienee's property until the debt is fully paid or the property is sold, and the proceeds are used to satisfy the remaining balance of the loan.
How to Avoid a Lien in Tennessee
The best way to avoid a lien is to prioritize paying debt promptly. Individuals are less likely to get stuck with a lien in the first place if they learn to stick to their budgets. Additionally, proactively seeking the services of a private attorney immediately when debtors think they may have a delinquent payment could save them the stress of being forced into a situation involving liens.