A lien may be beneficial when an entity is in debt or hasn’t fulfilled its financial commitments. It’s a legal right that is linked to the company’s assets which prevents the company from refinancing its assets or selling assets until debts are paid. This article will guide you through all the procedures when placing an institution in the process of putting a lien on it along with the different types of liens that are available.
What Is a Lien?
A lien is a lawful right given to a lender over the property of a debtor, up to the debt is settled. In the business world they can be attached to different assets, like real estate, equipment, as well as accounts receivable. This gives creditors an assurance that they will be compensated back. Liens are either voluntary (agreed on with both sides) and non-voluntary (filed in the absence of consent).
Types of Liens on a Business
There are many types of liens that you can put on a company based on the specific circumstances:
- Mechanic’s Lien: The mechanic’s lien is a regular system in the development business. Subcontractors or project workers who don’t get compensated for their administrations could apply for a repairman’s liens on the property of the business. The property of the business is burdened, and it could bring about a sale without force when obligation isn’t paid.
- Tax Liens: Tax authority might make an expense lien in the event that an association can’t cover charges. The state, government and neighborhood burdening specialists can each set an expense lien against a business’ resources like land, vehicles or receivables.
- Judgment Liens: on the off chance that you’ve documented a claim against a business and got the judgment of an appointed authority, which permits you to put the judgment lien on resources of the business. The lien will keep on being in force until the judgment is completely followed or booked to terminate.
- Security Interests: Security Interests an informal lien, usually given by a company as a condition of loans. If a company defaults on its obligations the lender may take security (e.g. property, assets and equipment).
Step-by-Step Guide to Placing a Lien on a Business
Track down Lawful Premise
The most important phase in putting a lien on your property is to guarantee you’re legitimately ready to do so that normally requires a substantial agreement or an obligation. For instance, you may have offered services or goods to a company that hasn’t yet been paid.
Make a claim
in court In many instances particularly for involuntary liens such as those with judgments, you’ll have to prevail in an action against the company. The court has to recognize the debt of the company, and the judgment must be rendered to your benefit.
When you have filed the lien:
If you’ve got a judgment from a court or a validly owed debt, you may apply for a lien at the county clerk’s office or recorder’s offices in the area where your business’s property is situated. The lien is legally encumbered to the company’s property.
Notification
Upon filing the lien, it is crucial to inform your business of the lien. For mechanic’s lien, many states require an “pre-lien” notice before officially filing so that the company has the opportunity to pay prior to when the lien is in effect.
Enforcement
If a company isn’t able to settle your debts, then you might be legally able to enforce the loan via foreclosure or any other legal method depending on the type of lien. For example a judgment lien may result in wage garnishments or seizures of property.
Best Practices for Filing a Lien
- Contact an attorney: Filing the lien can be a complicated legal process. A lawyer can help you adhere to the proper procedure and deadlines.
- Check the state Laws: The states that have different regulations for filing lien. For instance, mechanic’s lien are usually filed within a certain time frame after the work has been completed.
- Making sure you have proper evidence of debts is vital. Keep track of all invoices, contracts and any communications that pertain to debt.
How to Release a Lien
After the debt has been paid the lien has to be released in writing. As the creditor is responsible to file an “Release of Lien” with the same authority as the lien was originally filed. If you fail to file it, it could result in legal repercussions.
FAQs
What happens if a business fails to pay the debt when the lien is filed?
If your business doesn’t pay for it, the lien could increase the amount to enforcement, which means the sale of assets, or foreclosure on property to collect the debt.
Do I require an order from a judge to put a lien?
For the majority of involuntary liens, such as one that is a judgment lien you’ll require the court’s order. However, mechanic’s liens as well as tax liens may be filed without a court order.
What is the length of time a lien can last?
The time frame varies based on the state and type of line, however, many lines are in place for several years. For instance, a judgment lien can last for 10 years or longer if renewed
Can a business sell a property that has the lien attached to it?
If an obligation is imposed the company is not able to sell or refinance the property until it is resolved.
Conclusion
The issuance of a lien against the business is an effective method of securing repayment for debts that are not paid. If it’s a mechanic’s or a construction lien to cover construction projects that are not paid as well as a judgment lien after an unsuccessful lawsuit, knowing the legal procedure is crucial. Be sure to follow the laws of your state, and deadlines and you should consult an attorney to make sure the lien is valid and legally binding.